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. Where do banks keep liquid assets for Statutory Liquidity Ratio (SLR)?
[A] With themselves
[B] With the RBI
[C] With other banks
[D] In the market
Show Answer
Correct Answer: A [With themselves]
Notes:
Under the Statutory Liquidity Ratio (SLR), banks must maintain liquid assets such as cash, gold, or approved securities with themselves. SLR is mandated by the Reserve Bank of India under the Banking Regulation Act, 1949. The current SLR requirement is 18% of Net Demand and Time Liabilities (NDTL) as per RBI policy. These assets are not kept with the RBI.
2. Which among the following is a suitable term for the state of economy in which economic activity is slowing down but wages and prices continue to rise ?
[A] Inflation
[B] Deflation
[C] Skweflation
[D] Stagflation
Show Answer
Correct Answer: D [Stagflation]
Notes:
Stagflation refers to persistent high inflation coupled with high unemployment and stagnant demand /growth in economy.
High Inflation + Low Economic Growth {or conditions of recession} + Low Employment Generation = Stagflation
3. Which of the following organizations provides Buffer Stock Financing Facility ?
[A] Reserve Bank of India
[B] Asian Development Bank
[C] International Monetary Fund
[D] World Bank
Show Answer
Correct Answer: C [International Monetary Fund]
Notes:
IMF in 1969 to provide financial assistance to members with a temporary balance of payments need arising from contributions to buffer stocks established under approved international commodity agreements
4. Which organization aids members in balance of payments problems?
[A] World Bank
[B] International Monetary Fund
[C] Asian Development Bank
[D] World Economic Forum
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The International Monetary Fund was created in 1944 at the Bretton Woods Conference. Its main function is to provide temporary financial assistance to member countries facing balance of payments deficits. The IMF uses facilities like Stand-By Arrangements and Extended Fund Facility. Membership includes 190 countries as of 2023. The IMF also conducts economic surveillance and policy advice, but direct financial support for balance of payments stability is its core function.
5. Consider the following:
- Minor Irrigation Scheme: CCA less than 2000 Hectares
- Medium Irrigation Scheme : CCA more than 2000 Hectares but less than 10000 Hectares
- Major Irrigation Scheme : CCA more than 10000 Hectares
Which among the above statements is / are correct?
[A] Only 1 and 2 are correct
[B] Only 2 and 3 are correct
[C] all are correct
[D] all are incorrect
Show Answer
Correct Answer: C [all are correct]
Notes:
Various irrigation schemes in India were classified by the erstwhile planning commission into three parts viz. Minor, Medium and Major Irrigation schemes.
- Major irrigation Scheme: Major irrigation schemes are those schemes which have a Culturable Command Areas of More than 10,000 hectares.
- Medium irrigation Schemes: The Medium Irrigation Schemes have a CCA of 2,000-10,000 hectares.
- Minor Schemes: Those with Culturable command areas up to 2000 hectares.
Cultural command area is the basis for the design of water course and basis for the design of an irrigation project. It is the proportion of the Gross Command Area which is Culturable and cultivable.
6. Which has the highest weightage in the Index of Industrial Production (IIP)?
[A] Electricity
[B] Steel Industry
[C] Refinery Products
[D] Coal
Show Answer
Correct Answer: C [Refinery Products]
Notes:
Refinery products have the highest weightage of 28.04% in the Index of Industrial Production as per the IIP series with base year 2011-12. The Index of Industrial Production was first published in 1937. The IIP is calculated and released by the National Statistical Office, Ministry of Statistics and Programme Implementation, Government of India.
7. What does the greenshoe option allow underwriters to do during an IPO?
[A] Sell up to 15% additional shares beyond the original offering
[B] Record investor demands and change IPO pricing
[C] Purchase shares back from investors at a discount
[D] None of the above
Show Answer
Correct Answer: A [Sell up to 15% additional shares beyond the original offering]
Notes:
The greenshoe option is an IPO underwriting clause first used by Green Shoe Manufacturing Company. It allows underwriters to sell up to 15% extra shares above the original IPO amount to support share price stability and meet demand. The Securities and Exchange Commission permits this clause. The option helps underwriters stabilize prices by covering over-allotted shares in the aftermarket.
8. Custom duty is mainly an instrument of which policy?
[A] Monetary Policy
[B] Industrial Policy
[C] Foreign Trade Policy
[D] Fiscal Policy
Show Answer
Correct Answer: C [Foreign Trade Policy]
Notes:
Customs duty is governed by the Customs Act, 1962. It is imposed to regulate import and export of goods. The Directorate General of Foreign Trade (DGFT) administers India’s foreign trade policies. The Foreign Trade Policy of India is updated every five years. Customs duties are revised to align with international agreements and World Trade Organization guidelines.
9. At which rate does RBI borrow funds from commercial banks?
[A] Bank Rate
[B] Repo Rate
[C] Reverse Repo Rate
[D] Statutory Liquidity Ratio
Show Answer
Correct Answer: C [Reverse Repo Rate]
Notes:
The reverse repo rate is the rate at which the Reserve Bank of India borrows money from commercial banks. It is used to absorb liquidity from the banking system. RBI conducts reverse repo operations as part of its monetary policy framework. As of June 2024, the reverse repo rate is 3.35%. Reverse repo was introduced in 1996 under Section 17(4B) of the RBI Act, 1934.
10. Which of the following says that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling?
[A] Law of diminishing marginal product
[B] Law of variable proportions
[C] The Short Run
[D] The Long Run
Show Answer
Correct Answer: B [Law of variable proportions]
Notes:
The law of variable proportions states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline.
