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. Interest rate risk falls under which risk category?
[A] Credit risk
[B] Liquidity risk
[C] Market risk
[D] Operational risk
Show Answer
Correct Answer: C [Market risk]
Notes:
Interest rate risk refers to potential losses from fluctuations in interest rates. It is classified as a type of market risk. Changes in interest rates can directly impact the value of securities such as bonds. Market risk includes other elements such as equity risk and currency risk and is distinguished from credit risk, liquidity risk, or operational risk.
2. First state in India to launch a policy to establish Special Agriculture Zones (SAZs):
[A] Uttar Pradesh
[B] Gujarat
[C] Haryana
[D] Uttarakhand
Show Answer
Correct Answer: D [Uttarakhand]
Notes:
Uttarakhand was the first state to set up Special Agricultural Zones (SAZs) in 2011. It was launched on the lines of the Special Economic Zones (SEZs). It encouraged the farmers to develop high-quality crop seeds typical to hilly regions.
3. Which city hosts the world’s largest foreign exchange market?
[A] New York
[B] Singapore
[C] Tokyo
[D] London
Show Answer
Correct Answer: D [London]
Notes:
London accounts for about 38% of global foreign exchange trading turnover according to the Bank for International Settlements Triennial Central Bank Survey published in April 2025. London surpassed other financial centers such as New York, Tokyo, and Singapore based on daily transaction volumes. The city has maintained this status since the 1980s due to its favorable time zone and established financial infrastructure.
4. On which of the following Date a Bank publishes its balance sheet ?
[A] March 31
[B] April 1
[C] December 31
[D] January 1
Show Answer
Correct Answer: A [March 31]
Notes:
The financial year of India begins from April 1 of a calendar year and ends on March 31 of the next calendar year. This system has been into existence since the British Raj in India. Hence, Banks in India publish their financial statements / balance sheets for March 31st of every year.
5. The provisions relating to promissory notes have been incorporated in which among the following acts?
[A] Indian Contract Act
[B] Indian Partnership Act
[C] Negotiable Instruments Act
[D] None of the above
Show Answer
Correct Answer: C [Negotiable Instruments Act]
Notes:
The provisions relating to promissory notes are incorporated in the Negotiable Instruments Act, 1881. This Act governs various financial instruments, including promissory notes, bills of exchange, and cheques. It was enacted to facilitate trade and commerce by providing a legal framework for negotiable instruments in India. The Indian Contract Act, 1872, primarily deals with general contract law, while the Indian Partnership Act, 1932, focuses on partnerships.
6. 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.
7. Which of the following indicates a Liquidity trap?
[A] expansionary monetary policy does not encourage economic growth
[B] open market operations results in decrease in interest rates
[C] government prefers fiscal policies over monetary policies to regulate the money supply
[D] government undergoes liquidation of the government holdings on larger-scale to reduce fiscal deficit
Show Answer
Correct Answer: A [ expansionary monetary policy does not encourage economic growth ]
Notes:
Liquidity trap is a situation when expansionary monetary policy does not increase the interest rate, income and hence does not encourage the economic growth.
8. Which tool involves central banks signaling future interest rate intentions?
[A] Forward guidance
[B] Quantitative easing
[C] Open market operations
[D] Reserve requirements
Show Answer
Correct Answer: A [Forward guidance]
Notes:
Forward guidance was widely adopted after the 2008 global financial crisis. The Federal Reserve began explicit forward guidance in 2011. The European Central Bank used this tool in 2013. The Bank of Japan started using forward guidance in 2013. Forward guidance aims to influence market expectations about future monetary policy. It became prominent when policy rates approached zero, limiting conventional monetary tools.
9. Which industry is the largest water consumer in India?
[A] Textiles
[B] Thermal power
[C] Paper and pulp
[D] Engineering
Show Answer
Correct Answer: B [Thermal power]
Notes:
Thermal power plants in India use large volumes of water mainly for cooling and steam production. The Central Electricity Authority monitors water consumption by thermal power stations annually. Compared to paper, textiles, and engineering, thermal power contributes the highest industrial water use. India’s thermal electricity generation capacity exceeds 230 GW as of 2023, making it the major industrial water consumer.
10. Which among the following is an example of micro-economic variable?
[A] National Income
[B] Consumer’s Equilibrium
[C] Aggregate Supply
[D] Employment
Show Answer
Correct Answer: B [Consumer’s Equilibrium]
Notes:
Microeconomic variables are those patterns or elements that can be used to describe the behavior of a person or an individual economic unit, like a business. Eg. Consumer’s Equilibrium.
