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. What does the FDI trigger list in India primarily include?
[A] List of country-specific FDI restrictions under FEMA
[B] Sectors needing prior approval, like broadcasting and civil aviation
[C] Investors with suspicious funds and sectors or locations needing security screening
[D] All proposals submitted to DPIIT for automatic route processing
[B] Sectors needing prior approval, like broadcasting and civil aviation
[C] Investors with suspicious funds and sectors or locations needing security screening
[D] All proposals submitted to DPIIT for automatic route processing
Correct Answer: C [Investors with suspicious funds and sectors or locations needing security screening]
Notes:
The FDI trigger list in India includes proposals from investors with suspicious sources of funds and investments in sensitive sectors like broadcasting, telecommunications, civil aviation, and private security agencies. Investments in sensitive geographic areas, such as Jammu & Kashmir, are also included. Such proposals are scrutinized by the Ministry of Home Affairs for national security under the Foreign Exchange Management Act.
The FDI trigger list in India includes proposals from investors with suspicious sources of funds and investments in sensitive sectors like broadcasting, telecommunications, civil aviation, and private security agencies. Investments in sensitive geographic areas, such as Jammu & Kashmir, are also included. Such proposals are scrutinized by the Ministry of Home Affairs for national security under the Foreign Exchange Management Act.
2. Pump priming mainly deals with which of the following?
[A] Increased government expenditure during recession
[B] Decreased government expenditure during recession
[C] Increased government income during recession
[D] Decreased government income during recession
[B] Decreased government expenditure during recession
[C] Increased government income during recession
[D] Decreased government income during recession
Correct Answer: A [Increased government expenditure during recession]
Notes:
Pump priming refers to the collective measures taken by the governments during recession to simulate the economy during recession. This is done usually by cutting the taxes and increased public spending.
Pump priming refers to the collective measures taken by the governments during recession to simulate the economy during recession. This is done usually by cutting the taxes and increased public spending.
3. A competitive firm maximizes its profit when _______?
[A] MR=AR
[B] MR=MC
[C] MC=AC
[D] MC=AR
[B] MR=MC
[C] MC=AC
[D] MC=AR
Correct Answer: B [MR=MC]
Notes:
A competitive firm maximizes its profit when its marginal revenue equals its marginal cost. Marginal revenue is the additional revenue earned by the firm from selling an additional unit of output. When marginal revenue equals marginal cost, the firm is earning the maximum possible profit. The marginal cost of production and marginal revenues are two determinants used to analyze the profitability of the production. When the marginal cost is below the marginal revenue, the firm can increase its revenue by producing more. When a competitive firm maximizes profit, profits are always greater than 0.
A competitive firm maximizes its profit when its marginal revenue equals its marginal cost. Marginal revenue is the additional revenue earned by the firm from selling an additional unit of output. When marginal revenue equals marginal cost, the firm is earning the maximum possible profit. The marginal cost of production and marginal revenues are two determinants used to analyze the profitability of the production. When the marginal cost is below the marginal revenue, the firm can increase its revenue by producing more. When a competitive firm maximizes profit, profits are always greater than 0.
4. SIDBI was established as a subsidiary of which institution in 1990?
[A] Industrial Investment Bank of India Ltd
[B] Industrial Finance Corporation of India
[C] Reserve Bank of India
[D] Industrial Development Bank of India
[B] Industrial Finance Corporation of India
[C] Reserve Bank of India
[D] Industrial Development Bank of India
Correct Answer: D [Industrial Development Bank of India]
Notes:
SIDBI was established on April 2, 1990, as a wholly owned subsidiary of the Industrial Development Bank of India (IDBI) under an Act of Parliament. SIDBI acts as the principal financial institution for promoting, financing, and developing the Micro, Small, and Medium Enterprises (MSME) sector in India. SIDBI’s headquarters are in Lucknow, Uttar Pradesh.
SIDBI was established on April 2, 1990, as a wholly owned subsidiary of the Industrial Development Bank of India (IDBI) under an Act of Parliament. SIDBI acts as the principal financial institution for promoting, financing, and developing the Micro, Small, and Medium Enterprises (MSME) sector in India. SIDBI’s headquarters are in Lucknow, Uttar Pradesh.
5. In finance, what do Fixed to Floating and Floating to Floating refer to?
[A] Interest rates
[B] Swaps
[C] Foreign exchange rates
[D] Derivative contracts
[B] Swaps
[C] Foreign exchange rates
[D] Derivative contracts
Correct Answer: B [Swaps]
Notes:
Fixed to Floating and Floating to Floating describe interest rate swaps, which are derivative contracts exchanging fixed and floating interest payments. Interest rate swaps, including vanilla and basis swaps, are widely used for hedging and managing interest rate risk. Basis swaps exchange floating rates based on different benchmarks. These swaps play a major role in global financial markets and are commonly used by banks and corporations.
Fixed to Floating and Floating to Floating describe interest rate swaps, which are derivative contracts exchanging fixed and floating interest payments. Interest rate swaps, including vanilla and basis swaps, are widely used for hedging and managing interest rate risk. Basis swaps exchange floating rates based on different benchmarks. These swaps play a major role in global financial markets and are commonly used by banks and corporations.
6. Which of the following is not a part of Broad Money in India?
[A] Demand Deposits with Banks
[B] Currency with the Public
[C] Time Deposits with Banks
[D] Banks’ deposits with RBI
[B] Currency with the Public
[C] Time Deposits with Banks
[D] Banks’ deposits with RBI
Correct Answer: D [ Banks’ deposits with RBI ]
Notes:
Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence can not be withdrawn before expiry of this period. When we add the time despots into the narrow money, we get the broad money, which is denoted by M3. M3 = Narrow money + Time Deposits of public with banks Here, you must note that Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money. When you add the Post Office Savings money also into the M3, it becomes M4.
Narrow money is the most liquid part of the money supply because the demand deposits can be withdrawn anytime during the banking hours. Time deposits on the other hand have a fixed maturity period and hence can not be withdrawn before expiry of this period. When we add the time despots into the narrow money, we get the broad money, which is denoted by M3. M3 = Narrow money + Time Deposits of public with banks Here, you must note that Broad money does not include the interbank deposits such as deposits of banks with RBI or other banks. At the same time, time deposits of public with all banks including the cooperative banks are included in the Broad Money. When you add the Post Office Savings money also into the M3, it becomes M4.
7. Which industries mainly benefit from Mumbai Port in Maharashtra?
[A] Iron and Steel industry
[B] Sugar and Cotton textile industry
[C] Cotton textile and Petrochemical industry
[D] Engineering and Fertilizer industry
[B] Sugar and Cotton textile industry
[C] Cotton textile and Petrochemical industry
[D] Engineering and Fertilizer industry
Correct Answer: C [Cotton textile and Petrochemical industry]
Notes:
Mumbai Port in Maharashtra is a major center for handling cotton, petroleum, oil, and petrochemical shipments. It serves as a key import point for long staple cotton and machinery for the cotton textile sector. The port’s specialized terminals handle large volumes of petrochemical products. Cotton textile and petrochemical industries have longstanding reliance on Mumbai Port for raw material and export requirements.
Mumbai Port in Maharashtra is a major center for handling cotton, petroleum, oil, and petrochemical shipments. It serves as a key import point for long staple cotton and machinery for the cotton textile sector. The port’s specialized terminals handle large volumes of petrochemical products. Cotton textile and petrochemical industries have longstanding reliance on Mumbai Port for raw material and export requirements.
8. Which statement accurately describes the Rolling Plan in economic planning?
[A] Plan for full 5 years
[B] Formulation of annual plans
[C] Perspective of Five-Year Plan with annual extension for constant 5-year horizon
[D] Aims and achievements reviewed yearly in a Five-Year Plan
[B] Formulation of annual plans
[C] Perspective of Five-Year Plan with annual extension for constant 5-year horizon
[D] Aims and achievements reviewed yearly in a Five-Year Plan
Correct Answer: C [Perspective of Five-Year Plan with annual extension for constant 5-year horizon]
Notes:
The Rolling Plan, introduced in 1978 by India, provided a flexible planning method by extending the plan each year, maintaining a constant five-year horizon. This system allowed for annual adjustments in targets and allocations, replacing the rigid fixed Five-Year Plans previously followed.
The Rolling Plan, introduced in 1978 by India, provided a flexible planning method by extending the plan each year, maintaining a constant five-year horizon. This system allowed for annual adjustments in targets and allocations, replacing the rigid fixed Five-Year Plans previously followed.
9. What is the important function of taxation in India?
[A] Reduce black money
[B] Generate funds for Government expenditure
[C] Reduce inflation
[D] None of the above
[B] Generate funds for Government expenditure
[C] Reduce inflation
[D] None of the above
Correct Answer: B [Generate funds for Government expenditure]
Notes:
Taxation plays an important role in regional development and fulfilling government expenditure. Tax incentives such as tax holiday for setting up industries in backward regions, which induces business firms to set up industries in such regions, Tax revenue collected by government is also utilized for development of infrastructure in backward regions.
Taxation plays an important role in regional development and fulfilling government expenditure. Tax incentives such as tax holiday for setting up industries in backward regions, which induces business firms to set up industries in such regions, Tax revenue collected by government is also utilized for development of infrastructure in backward regions.
10. What is the primary basis for defining a small-scale industry in India?
[A] The market outreach of a unit
[B] The size of annual turnover
[C] Investment in plant and machinery
[D] Products listed by the Ministry of Industry
[B] The size of annual turnover
[C] Investment in plant and machinery
[D] Products listed by the Ministry of Industry
Correct Answer: C [Investment in plant and machinery]
Notes:
The MSME Development Act, 2006 defines small-scale industry based on investment in plant and machinery for manufacturing or equipment for services. The 2020 revision set the small enterprise limit at investment up to ₹10 crore and turnover up to ₹50 crore. Prior to this, only investment criteria were used in statutory definitions, excluding factors like sales or product lists.
The MSME Development Act, 2006 defines small-scale industry based on investment in plant and machinery for manufacturing or equipment for services. The 2020 revision set the small enterprise limit at investment up to ₹10 crore and turnover up to ₹50 crore. Prior to this, only investment criteria were used in statutory definitions, excluding factors like sales or product lists.
