Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for SSC, State and all One Day Examinations of India. Objective Questions on Indian Economy for competitive examinations.
1. Which of these is a negotiable instrument under the Negotiable Instruments Act, 1881?
[A] Airway bill
[B] Bank note
[C] Letter of credit
[D] Demand draft
Show Answer
Correct Answer: D [Demand draft]
Notes:
A demand draft is a negotiable instrument because it is an order issued by a bank to pay a specified sum to a named person or bearer, and it can be transferred as per the rules of negotiability. By contrast, an airway bill is a transport document, a letter of credit is a bank payment undertaking, and a bank note is legal tender governed separately under the RBI Act. The Negotiable Instruments Act primarily covers promissory notes, bills of exchange and cheques.
2. The unemployment of a person when he/she is in the midst of transitioning between jobs or searching for a new job comes under which category?
[A] Cyclical
[B] Voluntary
[C] Frictional
[D] Seasonal
Show Answer
Correct Answer: C [Frictional]
Notes:
Frictional unemployment refers to short-term unemployment that happens when people are changing jobs, entering the labour market, or looking for work that matches their skills. It is a normal feature of a dynamic economy because workers do not move instantly into new jobs. This type is different from cyclical unemployment, which rises during recessions, and seasonal unemployment, which occurs in specific seasons or periods of the year.
3. What is India's commitment on the number of new branches that foreign banks may open in a year under WTO GATS, and what is the corresponding branch commitment in the India–EU FTA?
[A] 12 branches per year under WTO GATS; 15 branches over four years under the India–EU FTA
[B] 15 branches per year under WTO GATS; 12 branches over four years under the India–EU FTA
[C] 12 branches per year under WTO GATS; 20 branches over four years under the India–EU FTA
[D] 20 branches per year under WTO GATS; 15 branches per year under the India–EU FTA
Show Answer
Correct Answer: A [12 branches per year under WTO GATS; 15 branches over four years under the India–EU FTA]
Notes:
India’s WTO commitment under GATS limits market access for foreign bank branches to 12 branches in a year for all foreign banks taken together. In the India–EU FTA financial services offer, the branch licensing framework is more liberal and allows up to 15 bank branches to be established over a four-year period. The two figures apply to different trade arrangements, so they should not be read as the same annual cap.
4. Which statement is true about an equity fund?
[A] It guarantees fixed returns to investors
[B] It invests equally in debt and equity securities
[C] It invests mainly in stocks for long-term capital growth
[D] It assures predictable growth regardless of markets
Show Answer
Correct Answer: C [It invests mainly in stocks for long-term capital growth]
Notes:
An equity fund is a pooled investment scheme that invests predominantly in shares of companies. SEBI regulations in India require at least 65% of total assets in equities or equity-related instruments for classification as an equity fund. These funds seek long-term capital appreciation by investing in listed companies. Returns depend on market performance and Net Asset Value. Equity funds do not offer guaranteed or fixed returns.
5. How many key infrastructure sectors are known as Core sector in Indian Economy, used for Index of Industrial Production (IIP) data?
[A] 5
[B] 6
[C] 7
[D] 8
Show Answer
Correct Answer: D [8]
Notes:
There are 8 Core Industries or core sectors of the economy viz. coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity used in Index of Industrial Production (IIP).
6. The Direct Taxes Code (DTC) is associated with which tax?
[A] Income Tax
[B] Sales Tax
[C] Excise Duty
[D] Service Tax
Show Answer
Correct Answer: A [Income Tax]
Notes:
The Direct Taxes Code (DTC) was proposed in 2009 to replace the Income Tax Act, 1961. It aimed to simplify and consolidate laws related to direct taxes in India. The DTC focused on income tax and other direct taxes. The DTC Bill was introduced in Parliament in 2010 but has not been enacted as of 2024. Indirect taxes like sales tax and excise duty are not covered.
7. Inflation Indexed Bonds (IIBs) in India are primarily linked to which inflation index?
[A] WPI
[B] CPI
[C] Both WPI and CPI
[D] None of the above
Show Answer
Correct Answer: B [CPI]
Notes:
In India, Inflation Indexed Bonds issued for retail investors were CPI-based, meaning both principal and coupon payments were protected against inflation measured by the Consumer Price Index. RBI FAQs also distinguish these from earlier capital indexed bonds, which were linked to WPI. Hence, CPI is the correct answer.
8. Which of the following items is characterised by highest income elasticity of demand among others?
[A] Car
[B] Milk
[C] Paddy
[D] Tobacco
Show Answer
Correct Answer: A [ Car ]
Notes:In case of High-income elasticity of demand, an increase in income is accompanied by a relatively larger increase in quantity demanded for normal goods. Thus, among the given options Car has highest income elasticity of demand.
- Car: A luxury good with high income elasticity; demand rises sharply with an increase in income.
- Milk: A necessity good with low to moderate income elasticity.
- Paddy: A basic necessity and staple food, with very low income elasticity.
- Tobacco: Considered an addictive good with low or even negative income elasticity in some cases, as demand is less income-sensitive.
9. Which one of the following is NOT generally considered a sign of economic development?
[A] Changing structure of GDP in favour of industry and services
[B] Larger share of GDP coming from the primary sector
[C] Improved infrastructure and institutional changes in an economy
[D] Rising per capita income and productivity
Show Answer
Correct Answer: B [Larger share of GDP coming from the primary sector]
Notes:
Economic development is usually associated with structural transformation: the share of agriculture/primary sector declines, while industry and services expand. It is also reflected in better institutions, infrastructure, higher productivity and rising per capita income. A larger GDP share from the primary sector generally indicates a less developed economic structure.
10. A transfer payment is a payment that is __:
[A] made by the government to its current workers
[B] made to people who are needy
[C] For in-kind services provided to the government
[D] For which no services or goods are rendered
Show Answer
Correct Answer: D [ For which no services or goods are rendered ]
Notes:
Transfer Payment is the payment exchanged for return of no goods or services. It generally describes the welfare expenditure of the government such as subsidies, pensions, grants etc.
