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 portion of total deposits of a commercial bank which it has to keep with itself in the form of liquid assets is called ___ ?
[A] Statutory Liquidity Ratio
[B] Cash Reserve Ratio
[C] Statutory Reserve Ratio
[D] Cash ratio
Show Answer
Correct Answer: A [Statutory Liquidity Ratio]
Notes:
Statutory Liquidity Ratio (SLR) is the portion of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. The banks are expected to maintain the deposits with themselves before offering credit to customers.
2. Which among the following defines ‘currency depreciation” of a currency?
[A] Fall in the exchange rate of one currency in terms of other currencies
[B] Fall in the exchange rate of other currencies in terms of one currencies
[C] Decrease in the volume of a particular currency
[D] Increase in the exchange rate of a currency
Show Answer
Correct Answer: A [Fall in the exchange rate of one currency in terms of other currencies]
Notes:
Currency depreciation is the loss of value of a country’s currency with respect to one or more foreign reference currencies. This is a term used in floating exchange rate system, where the exchange rates of a currency are market driven and not fixed by the country’s central bank.
3. In which of the five year plan in India, the concept of Financial Inclusion was included for the first time?
[A] 8th Five Year Plan
[B] 9th Five Year Plan
[C] 10th Five Year Plan
[D] 11th Five Year Plan
Show Answer
Correct Answer: D [11th Five Year Plan]
Notes:
The 11th Five Year Plan was implemented from 2007-2012, when Manmohan Sigh was India’s Prime Minster. The main slogan for the 11th FYP was “Faster and more inclusive growth”. The 11th FYP made special emphasis on Financial Inclusion, poverty reduction, empowerment through education and skill development etc.
4. Which among the following does not go with Progressive taxation?
[A] ability to pay
[B] administrative convenience
[C] in built stabilizer
[D] will to work and save
Show Answer
Correct Answer: D [will to work and save]
Notes:
Progressive taxation is based on the principle that those with a higher ability to pay should contribute a larger percentage of their income. It emphasizes administrative convenience and acts as an in-built stabilizer by reducing income inequality. However, it can discourage the will to work and save, as higher earners may feel penalized by increased tax rates. Thus, “will to work and save” does not align with the principles of progressive taxation.
5. Which among the following are TOP 3 debtors of World Bank ?
[A] India, South Africa, Mexico
[B] India, Mexico, South Africa
[C] India, Mexico, Pakistan
[D] Mexico, India, South Africa
Show Answer
Correct Answer: B [India, Mexico, South Africa]
Notes:
The correct answer is “India, Mexico, South Africa.” As of recent data, India is one of the largest borrowers from the World Bank, primarily for development projects. Mexico also has important loans for infrastructure and social programs. South Africa has received funding for various initiatives, including poverty alleviation and economic development. The World Bank’s lending is aimed at reducing poverty and promoting sustainable development in these countries.
6. The competitive devaluation by the countries would badly affect which among the following?
[A] Exporters
[B] Importers
[C] Traders
[D] Service Providers
Show Answer
Correct Answer: A [Exporters]
Notes:
When competitors devalue their respective currencies, domestic exporters tend to lose out on the price advantage on their exportable as buyers prefer to buy from a cheaper currency. This in turn hurts income as well as the jobs in the export sector and the prospects for the economy. The central bank at such times tries to intervene – buy dollars and create an artificial demand for the dollar, devaluing the value of the rupee in the process and retain some price advantage for the exporter . But buying dollars involves a fiscal cost as the central bank has to pump in equivalent amount of rupees and again mop it up by selling bonds. These bonds need to be serviced by the government. This would in turn worsen the fiscal position
7. The minimum interest rate of a bank below which it is not viable to lend, is known as ____:
[A] Reserved Rate
[B] Base Rate
[C] Marginal Rate
[D] Prime Lending Rate
Show Answer
Correct Answer: B [Base Rate]
Notes:
The correct answer is “Base Rate.” The Base Rate is the minimum interest rate set by a bank for lending to its customers. It serves as a benchmark for various loans and is influenced by factors like the central bank’s policy rate and the bank’s cost of funds. The Base Rate ensures that banks cover their costs and maintain profitability while lending. In many countries, including India, the Base Rate is a crucial component of monetary policy and financial stability.
8. Which among the following would generally happen if there is an increase in the Bank Rates?
[A] An increase in market rates of interest.
[B] A fall in market rates of interest.
[C] A rise only in the deposit rates but not the lending rates.
[D] A rise only in the lending rates.
Show Answer
Correct Answer: A [ An increase in market rates of interest. ]
Notes:
An increase in bank rates typically leads to an increase in market interest rates. This is because bank rates influence the cost of borrowing for banks, which they pass on to consumers and businesses. Higher bank rates make loans more expensive, discouraging borrowing and spending, which can slow economic growth. Historically, central banks adjust rates to control inflation. for example, the Federal Reserve raised rates in the 1980s to combat high inflation.
9. A person reaches the Bank with a Demand Draft payable to his account. At this situation, the Bank works as which of the following?
[A] Creditor
[B] Debtor
[C] Beneficiary
[D] Trustee
Show Answer
Correct Answer: D [ Trustee ]
Notes:
The bank act as a trustee to the person as the person is withdrawing his own money; he is neither taking loan nor depositing money for fixed duration to bank, for him to be debtor or creditor.
10. In context with the share markets in India, public issue refers to which of the following?
[A] first time issuance of shares of a company via stock exchange
[B] first time issuance of shares of a public company via stock exchange
[C] allotment of shares to 50 or more investors
[D] allotment of shares to public by 50% or more fraction of the total equity
Show Answer
Correct Answer: C [ allotment of shares to 50 or more investors ]
Notes:
The primary market issuance is done either through public issues or private placement. Under Companies Act, 1956, an issue is referred as public if it results in allotment of securities to 50 investors or more. However, when the issuer makes an issue of securities to a select group of persons not exceeding 49 and which is neither a rights issue nor a public issue it is called a private placement.
