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 among the following was chosen as a unit of developing banking infrastructure in the Lead Bank Scheme?
[A] Town
[B] Village
[C] District
[D] Panchayat
Show Answer
Correct Answer: C [District]
Notes:
Leader Bank Scheme was based on Area Approach for targeted and focused banking. The banker’s committee, headed by S. Nariman, concluded that districts would be the units for area approach and each district could be allotted to a particular bank which will perform the role of a Lead Bank.
2. A Bank opened in Special Economic Zones in India comes under which among the following ?
[A] International Banking
[B] Domestic Banking
[C] Offshore Banking
[D] National banking
Show Answer
Correct Answer: C [Offshore Banking]
Notes:
The correct answer is Offshore Banking. In India, banks operating in Special Economic Zones (SEZs) are classified as offshore banks. These banks cater primarily to foreign entities and provide services that are exempt from certain domestic regulations, promoting international trade and investment. SEZs in India were established to enhance economic growth and attract foreign investment, with specific benefits like tax exemptions and simplified regulations.
3. Which among the following bank had issued first successful Credit Card of the world?
[A] Bank of America
[B] Standard Chartered Bank
[C] CitiBank
[D] ANZ Grindlays Bank
Show Answer
Correct Answer: A [Bank of America]
Notes:
The first successful credit card was issued by Bank of America in 1950. It was called the “BankAmericard,” which later evolved into Visa. This innovation revolutionized consumer credit and payment systems, paving the way for modern credit cards.
4. The investment in Plant & Machinery up to which among the following amounts in India is called a Tiny Unit in India?
[A] Rs. 5 Lakh
[B] Rs. 10 Lakh
[C] Rs. 15 Lakh
[D] Rs. 25 Lakh
Show Answer
Correct Answer: D [Rs. 25 Lakh]
Notes:
A tiny unit is a business enterprise that invests less than Rs. 25 lakh in plant and machinery. This limit applies regardless of the location of the unit.
A small scale industry is an industrial undertaking that invests in plant and machinery. The investment can be held on ownership terms, on lease, or by hire purchase.
5. Foreign Direct Investment(FDI) and Foreign Institutional Investment(FII) are distinct in terms of?
[A] FDI brings capital, technology & management and FII brings only capital
[B] FDI targets specific sectors and FII help in increasing foreign capital availability
[C] FII is considered more stable
[D] FII targets both primary and secondary market while FDI targets only primary.
Show Answer
Correct Answer: A [FDI brings capital, technology & management and FII brings only capital]
Notes:
Foreign Direct Investment (FDI) involves long-term investments in physical assets, bringing capital, technology, and management expertise to a country. In contrast, Foreign Institutional Investment (FII) primarily involves short-term capital investments in financial markets, such as stocks and bonds, without direct control over businesses. FDI is typically more stable and less volatile than FII, which can quickly exit markets, impacting local economies. FDI often targets specific sectors for development, while FII can invest across various market segments.
6. Which among the following is a correct definition of the “Inflationary gap”?
[A] The difference between total spending at full employment level and total spending above that level.
[B] The difference between the price of a product at a time and price of that product at some different time
[C] Difference between the national expenditure and total expenditure
[D] Difference between Estimated fiscal deficit and actual fiscal deficit
Show Answer
Correct Answer: A [ The difference between total spending at full employment level and total spending above that level. ]
Notes:
The “inflationary gap” refers to the difference between total spending at full employment and total spending above that level. This occurs when demand exceeds the economy’s capacity to produce goods and services, leading to upward pressure on prices. Historically, inflationary gaps can result from excessive government spending or rapid economic growth, often leading to inflation. For example, during the 1970s, many economies experienced inflationary gaps due to oil price shocks and increased demand.
7. The proposed Wholesale & Long-Term Finance Banks (WLTF):
- cannot accept saving deposits
- will raise fund by issuing rupee denominated bonds, locally as well as in abroad
- require to maintain 40 percent of their branches in rural areas
Which of the above statements is/are correct?
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 1 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: A [Only 1 & 2 ]
Notes:
First statement is correct because the proposed Wholesale & Long-Term Finance Bank (WLTF) banks cannot accept the saving deposits and can accept only current account and term deposits of at least Rs 10 crore. Second statement is again correct because these banks are allowed to raise money through rupee denominated bonds issued locally as well as abroad. Third statement is incorrect. These banks will be exempted from opening branches in rural and semi-urban areas and will not be forced to lend to agriculture and weaker sections of the society. The Wholesale and Long-Term Finance (WLTF) banks, as proposed in the paper, will focus primarily on lending to infrastructure sector and small, medium and corporate businesses. The eligibility criteria of promoters for a Wholesale and Long-term Finance Bank (WLTFB) will be the same as that for universal banking licence. Raising funds from selling rupee denominated bonds locally or abroad will be a major source of funds for WLTFBs. WLTFBs will also have to maintain cash reserve ratio (CRR) like other commercial banks but do not require to maintain statutory liquidity ratio (SLR).
8. Which among the following is not an instrument of fiscal policy?
[A] Taxation
[B] Public expenditure
[C] Public debt
[D] Credit Rationing
Show Answer
Correct Answer: D [Credit Rationing]
Notes:
The 3 main instruments of fiscal policy are government taxation and public expenditure and public debt. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
9. Three communicable diseases prevalent in developing countries caused by unsafe drinking water and bad sanitation are?
[A] acute diarrhoea, cancer and gout
[B] malaria, acute diarrhoea and schistosomiasis
[C] onchocerciasis, leukaemia and arthritis
[D] rheumatism, malaria and AIDS
Show Answer
Correct Answer: B [malaria, acute diarrhoea and schistosomiasis]
Notes:
Contaminated water can transmit diseases such as diarrhoea, schistosomiasis, cholera, dysentery, typhoid and polio. Malaria is caused by mosquitoes which develop in areas of bad sanitation.
10. Which of the following is the limitation of the Socialist Economic system?
[A] High Taxes
[B] Easy Mobilization of resources
[C] Concentration of wealth is prevented
[D] Market Monopoly doesn’t exist
Show Answer
Correct Answer: A [High Taxes]
Notes:
In a socialist economy, taxes are high on the people as the state has to provide all the goods and services to all. The other options given are the advantages of the system.
