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. The “Service area Approach” was an strategy launched to improve which of the following?
[A] Micro, Small and medium Enterprising
[B] Unorganized Sector
[C] Rural lending
[D] Urban Industrial Lending
Show Answer
Correct Answer: C [Rural lending]
Notes:
The “Service Area Approach” was introduced in 1989 by the Reserve Bank of India to enhance rural lending. It aimed to allocate specific geographical areas to banks, ensuring that credit and financial services reached underserved rural populations. This strategy was part of broader efforts to promote financial inclusion and support rural development, addressing the needs of agriculture and small enterprises.
2. Which term refers to the maximum capital a company can raise in its lifetime?
[A] Authorized Capital
[B] Registered Capital
[C] Nominal Capital
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Authorized capital is the maximum share capital stated in a company’s Memorandum of Association. Registered capital and nominal capital are alternate terms for authorized capital. This ceiling cannot be exceeded without shareholder approval and modification in company documents as per the Companies Act, 2013.
3. How does the Indian government provide food subsidy?
[A] By fixing Central Issue Prices
[B] Through Public Distribution System
[C] By funding Food Corporation of India
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Food subsidy in India is provided through multiple channels. The government fixes Central Issue Prices for subsidized foodgrains, supplies them through the Public Distribution System, and also supports the Food Corporation of India for procurement, storage, and distribution. Hence, all three statements are correct.
4. 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.
5. What is the correct definition of an inflationary gap?
[A] The difference between the price of a product at two times
[B] The difference between actual GDP and potential GDP when actual GDP exceeds potential GDP
[C] The difference between national expenditure and total expenditure
[D] The difference between estimated fiscal deficit and actual fiscal deficit
Show Answer
Correct Answer: B [The difference between actual GDP and potential GDP when actual GDP exceeds potential GDP]
Notes:
An inflationary gap exists when actual GDP exceeds potential GDP. This describes an economic condition where production surpasses the sustainable full employment level, creating excess demand over supply. The concept was introduced by John Maynard Keynes. The inflationary gap is calculated as Actual GDP minus Potential GDP. This situation generally leads to increased prices and inflationary pressures in the economy.
6. The negotiable instruments are passed freely from one party to another almost in the same way as money. To be negotiable, a promissory note must include a / an:
[A] conditional promise to pay on demand or at a definite time
[B] unconditional promise to pay on demand or at an indefinite time
[C] unconditional promise to pay on demand or at a definite time
[D] conditional promise to pay on demand or at an indefinite time
Show Answer
Correct Answer: C [unconditional promise to pay on demand or at a definite time]
Notes:
A promissory note is a negotiable instrument only when it contains an unconditional promise to pay a certain sum of money. The payment may be made on demand or at a definite time, but it cannot depend on any condition. This is a basic requirement under negotiable instruments law. Therefore, option 3 correctly states the essential feature of negotiability in a promissory note.
7. Which option defines ‘shares outstanding’ most accurately?
[A] Total shares authorized minus never issued shares
[B] Total issued shares minus treasury shares
[C] Shares held only by institutional investors and insiders
[D] All authorized shares sold to investors
Show Answer
Correct Answer: B [Total issued shares minus treasury shares]
Notes:
Shares outstanding equals total issued shares minus treasury shares. Treasury shares are shares repurchased by the company and held in its treasury. Shares outstanding are used in calculating market capitalization and earnings per share. Only shares held by external shareholders are considered outstanding. This figure changes when the company buys back or issues new shares.
8. If interest payments are subtracted from gross fiscal deficit, the remainder will be__:
[A] Revenue deficit
[B] Gross primary deficit
[C] Capital deficit
[D] Budgetary deficit
Show Answer
Correct Answer: B [ Gross primary deficit ]
Notes:
Primary deficit is the gross deficit which is obtained by subtracting interest payments from budget deficit of any country of a particular year. We need to know the value of primary deficit, while calculating the fiscal deficit. Alternative Definition of Primary Deficit Primary deficit corresponds to the net borrowing, which is required to meet the expenditure excluding the interest payment. Primary Deficit = (Fiscal Deficit – Interest Payment)
9. 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.
10. How has the World Bank classified India’s economy in its FY2027 income classification?
[A] Low-income economy
[B] High-income economy
[C] Upper-middle-income economy
[D] Lower-middle-income economy
Show Answer
Correct Answer: D [Lower-middle-income economy]
Notes:
The World Bank classifies countries by gross national income (GNI) per capita using income bands updated each year. In the FY2027 classification, India continues to fall in the lower-middle-income category. This means India’s GNI per capita is above the low-income threshold but below the upper-middle-income threshold. Hence, among the given options, the correct classification is lower-middle-income economy.
