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. If the demand and supply of a commodity increase by an equal absolute amount, what will be the effect on market price?
[A] Increase
[B] Decrease
[C] Remain Stable
[D] First decrease then increase
Show Answer
Correct Answer: C [Remain Stable]
Notes:
When the market is in equilibrium, and when the demand and supply of a commodity increase by an equal absolute amount, the market price will not increase, rather it will remain stable.
2. What happens to deposit rates if RBI tightens monetary policy?
[A] Deposit rates will decrease
[B] Deposit rates will remain unchanged
[C] Deposit rates will increase
[D] Rates may increase or decrease
Show Answer
Correct Answer: C [Deposit rates will increase]
Notes:
When the RBI tightens its policy by raising the repo rate, banks face higher borrowing costs from the RBI. Banks increase deposit rates to attract funds from the public. For example, the repo rate was increased multiple times in 2022 and banks responded by increasing fixed deposit rates between May and December 2022.
3. What is a key financial power of the World Bank?
[A] The right to set pegged currency parities
[B] The right to issue bonds for development loans
[C] The right to purchase gold below market rate
[D] All of the above
Show Answer
Correct Answer: B [The right to issue bonds for development loans]
Notes:
The World Bank has issued bonds in global markets since 1947. Bonds are issued in various currencies and formats, including domestic and Eurobonds. Funds raised through these bonds finance development loans and projects in member countries. The World Bank holds triple-A credit ratings by Moody’s and S&P. Over 180 member countries are eligible for World Bank development financing.
4. What is dematerialization of securities in financial markets?
[A] The shortening of debt repayment periods on bonds
[B] Repurchase of outstanding shares by a company
[C] Conversion of physical share certificates into electronic format
[D] Prevention of share prices from falling below a minimum
Show Answer
Correct Answer: C [Conversion of physical share certificates into electronic format]
Notes:
Dematerialization converts physical securities into electronic format held in demat accounts. In India, this process is regulated by SEBI. Compulsory dematerialization for listed companies began in 1996 and for private companies from October 27, 2023. Investors must open demat accounts with SEBI-registered Depository Participants. Dematerialization reduces risks related to theft and forgery and enables faster settlements.
5. Which among the following authority appoints a Deputy Governor in Reserve Bank of India?
[A] Governor of RBI
[B] Central Board of Directors
[C] Central Government
[D] Committee of the Central Board
Show Answer
Correct Answer: C [Central Government]
Notes:
The correct answer is “Central Government.” In India, the Deputy Governors of the Reserve Bank of India (RBI) are appointed by the Central Government under Section 8 of the Reserve Bank of India Act, 1934. The RBI has four Deputy Governors, and their roles include overseeing various departments such as monetary policy, financial markets, and banking regulation. This appointment process reflects the government’s influence on the central bank’s operations.
6. Consider the following statements regarding Exchange Earners’ Foreign Currency (EEFC) Accounts:
- They are opened with the Reserve Bank of India (RBI)
- They earn interest on deposits
- They need a minimum balance to be maintained by the account holder
- They are non-interest bearing current accounts opened with authorized dealer banks
Which of the above statements is / are correct?
[A] Only 1
[B] 1 and 2
[C] Only 4
[D] 2 and 3
Show Answer
Correct Answer: C [Only 4]
Notes:
EEFC accounts are non-interest bearing current accounts maintained by authorized dealer (Category-I) banks following RBI regulations. These do not earn interest and require no minimum balance. Such accounts are not held directly with RBI but through authorized dealers. Therefore, only statement 4 is correct as per current RBI rules.
7. Who are eligible beneficiaries of the Reverse Mortgage Scheme?
[A] Government Employees
[B] Senior Citizens aged 60 years and above
[C] Unemployed Persons
[D] Working Professionals below 55 years
Show Answer
Correct Answer: B [Senior Citizens aged 60 years and above]
Notes:
The Reverse Mortgage Scheme in India was launched in 2007. The scheme targets senior citizens aged 60 years and above as beneficiaries. Joint borrowers may apply if at least one applicant is aged 60 years and the other not below 55 years. The scheme allows senior homeowners to mortgage property for regular payments from lenders. Ownership remains with the borrower during the loan tenure.
8. Which was NOT a stipulated target in the FRBM Act, 2003?
[A] Elimination of revenue deficit
[B] Reduction of fiscal deficit to 3% of GDP
[C] Limiting government guarantees to 0.5% of GDP
[D] Complete elimination of primary deficit
Show Answer
Correct Answer: D [Complete elimination of primary deficit]
Notes:
The FRBM Act, 2003 mandated elimination of revenue deficit, reduction of fiscal deficit to 3% of GDP, and limitation of government guarantees. The Act did not stipulate complete elimination of the primary deficit as a statutory target. The focus was on fiscal and revenue deficit reduction. The 2018 amendment revised several targets but did not mandate elimination of the primary deficit as a statutory requirement.
9. With reference to the World Trade Organization, the principle of reciprocity within WTO framework envisages?
[A] Lowering of trade barriers by a State to be matched in return.
[B] Creation of trade barriers on uniform basis
[C] Protection of intellectual property rights.
[D] Enhanced role for State controls on trade
Show Answer
Correct Answer: A [ Lowering of trade barriers by a State to be matched in return. ]
Notes:
The principle of reciprocity in the WTO framework means that when one member lowers trade barriers, other members are expected to do the same in return. This mutual concession promotes fair trade practices and encourages countries to engage in negotiations. Reciprocity is fundamental to the WTO’s goal of reducing trade barriers globally, fostering a more open and equitable trading system.
10. What is a key feature of Interval Funds in financial markets?
[A] Provide capital appreciation over the medium to long-term
[B] Invest half in stock and half in commodity market
[C] Provide both growth and regular income
[D] Offer redemption at intervals with continuous share purchases
Show Answer
Correct Answer: D [Offer redemption at intervals with continuous share purchases]
Notes:
Interval funds are a hybrid of open-ended and closed-ended funds. They allow continuous purchases but restrict redemptions to specific intervals, usually monthly or quarterly. Redemptions are permitted only during these fixed periods. The Securities and Exchange Commission (SEC) regulates these funds in the United States. Interval funds are different from daily-liquid mutual funds.
