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. In September 1999, which organization established the Poverty Reduction and Growth Facility (PRGF) to make the objectives of poverty reduction and growth more central to lending operations in its poorest member countries?
[A] Asian Development Bank
[B] International Monetary Fund
[C] World Bank
[D] US Federal Bank
Show Answer
Correct Answer: B [International Monetary Fund]
Notes:
The Poverty Reduction and Growth Facility (PRGF) was set up by the International Monetary Fund in September 1999. Its objective was to formulate policies focusing on growth and poverty reduction.
2. Which tool is used for sterilization during foreign capital inflows to control inflation?
[A] Filtering undeclared foreign assets
[B] Selling government securities in the open market
[C] Imposing restrictions on foreign exchange trading
[D] Allowing currency to appreciate freely
Show Answer
Correct Answer: B [Selling government securities in the open market]
Notes:
Sterilization involves central banks selling government securities in the open market to absorb liquidity created by foreign capital inflows. The Reserve Bank of India uses open market operations for this purpose. By selling government securities, the central bank withdraws excess rupee liquidity from the banking system. This method helps limit the expansion of the money supply and manage inflationary pressures resulting from increased foreign exchange reserves.
3. 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
Show Answer
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.
4. Progressive taxation aligns with which principle in tax theory?
[A] Benefit principle
[B] Cost of service theory
[C] Ability to pay principle
[D] Equity of sacrifice approach
Show Answer
Correct Answer: C [Ability to pay principle]
Notes:
The ability to pay principle is a basis for progressive taxation, taxing individuals according to their income levels. Progressive tax rates increase as income rises under this principle. India’s income tax is based on this principle, with tax slabs laid down in the Income Tax Act, 1961. Most modern tax systems, including those of the UK and India, use this approach.
5. With which of the following countries, India has signed First Tax Information Exchange Agreement?
[A] Belize
[B] Bermuda
[C] Guyana
[D] Honduras
Show Answer
Correct Answer: B [Bermuda]
Notes:
India and Bermuda signed a Tax Information Exchange Agreement (TIEA) in 2010. This was the first TIEA being signed by India.
6. Investment in which among the following is the Most Risk Free asset of a Bank as per the RBI guidelines?
[A] Housing Loans
[B] Government Approved Securities
[C] Venture Capital Investments
[D] Loans against Jewellery
Show Answer
Correct Answer: B [Government Approved Securities]
7. Consider the following statements regarding Cash Management Bills (CMBs):
- Cash Management Bills are short-term money market instruments with maturity less than 91 days.
- Cash Management Bills are issued at a discount to face value and redeemed at face value upon maturity.
- Cash Management Bills are issued by the Reserve Bank of India on behalf of the Central Government.
- Cash Management Bills follow a fixed, pre-determined issuance schedule like Treasury Bills.
Which of the above statements is / are correct?
[A] Only 1 and 2 are correct
[B] Only 1, 2, and 3 are correct
[C] All are correct
[D] Only 2 and 3 are correct
Show Answer
Correct Answer: B [Only 1, 2, and 3 are correct]
Notes:
Statements 1, 2, and 3 are correct. Cash Management Bills (CMBs) are short-term securities with maturities less than 91 days, issued at a discount and redeemed at face value, by the RBI on behalf of the Central Government. Statement 4 is incorrect; unlike Treasury Bills, CMBs are issued as per requirement, not on a fixed schedule, enabling flexible management of government cash flows.
8. UDYAMI helpline is for?
[A] Large capital Industries
[B] Female entrepreneur
[C] Farmers introducing technology in Farming
[D] Micro, small & medium size enterprises
Show Answer
Correct Answer: D [Micro, small & medium size enterprises]
Notes:
Udyami Helpline with number 1800 180 6763 is a Call Centre of Ministry of Micro, Small and Medium Enterprises (MSME), Government of India. It was launched in 2010 to work as a single point facility for MSMEs needing different kinds of information and accessibility of Banks and other MSME-related organisations.
9. Which is the oldest public sector bank in India?
[A] Punjab National Bank
[B] Imperial Bank of India
[C] Allahabad Bank
[D] Central Bank of India
Show Answer
Correct Answer: C [Allahabad Bank]
Notes:
Allahabad Bank was founded in 1865 in Allahabad. It was nationalized by the Government of India in 1969. The bank’s operations merged with Indian Bank in April 2020. Punjab National Bank started in 1894, Central Bank of India in 1911, and Imperial Bank of India was set up in 1921. Allahabad Bank operated for 155 years until its amalgamation.
10. Inflation Indexed Bonds is pegged to ___?
[A] WPI
[B] CPI
[C] Both WPI and CPI
[D] None of the above
Show Answer
Correct Answer: A [WPI]
Notes:
Inflation Indexed Bonds (IIBs) are pegged to the Consumer Price Index (CPI). This means their interest payments and principal value adjust based on changes in the CPI, which measures the average change over time in the prices paid by consumers for goods and services. IIBs aim to protect investors from inflation, ensuring that the purchasing power of their returns is maintained. In India, the CPI is the primary measure for these bonds, while the Wholesale Price Index (WPI) measures price changes at the wholesale level and is not used for IIBs.
