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. A rise in the price of one commodity leads to a fall in the demand for another commodity. Such commodities are called:
[A] Complementary
[B] Supplementary
[C] Competing
[D] Auxiliary
Show Answer
Correct Answer: A [Complementary]
Notes:
Complementary goods are used together, such as tea and sugar or printers and ink. If the price of one good rises, demand for its complement often falls because the two goods are consumed jointly.
2. What was Collateralized Borrowing and Lending Obligation (CBLO) in the Indian money market before it was discontinued?
[A] An export financing scheme requiring specific borrower obligations
[B] A central bank facility for state government short-term lending
[C] A CCIL-developed, RBI-approved money market instrument for collateralized borrowing and lending
[D] A derivative instrument for trading in currency and commodity futures
Show Answer
Correct Answer: C [A CCIL-developed, RBI-approved money market instrument for collateralized borrowing and lending]
Notes:
CBLO was a money market instrument developed by the Clearing Corporation of India Limited (CCIL) and approved by the Reserve Bank of India. It enabled collateralized borrowing and lending, typically backed by government securities, among eligible market participants. CBLO operated in the Indian money market until it was replaced by Triparty Repo (TREP/TREPS) from November 5, 2018. Hence, the correct description is the CCIL-developed, RBI-approved instrument for collateralized borrowing and lending.
3. Consider the following institutions:
International Monetary Fund
World Bank
World Trade Organization
US Treasury Department
Which among the above institutions are commonly associated with the Washington Consensus?
[A] 1 & 2
[B] 1, 2 & 3
[C] 1, 2 & 4
[D] 1, 2, 3 & 4
Show Answer
Correct Answer: C [1, 2 & 4]
Notes:
The term Washington Consensus is commonly linked with policy ideas associated with institutions based in Washington, D.C., especially the International Monetary Fund, the World Bank, and the US Treasury Department. It is not usually associated with the World Trade Organization, which was created later and is not part of the original framework. Hence, statements 1, 2 and 4 are correct.
4. In which year was RBI empowered to regulate money market, foreign exchange market, government securities market and gold-related securities market?
[A] 2004
[B] 2006
[C] 2008
[D] 2010
Show Answer
Correct Answer: B [2006]
Notes:
The Reserve Bank of India was given expanded regulatory powers over these financial markets in 2006. The change was brought through amendments to the RBI Act, 1934, which strengthened RBI’s role in supervising market transactions and related instruments. This step helped improve oversight of money market, forex market, government securities and gold-related securities, supporting financial stability and orderly development of the financial system.
5. Consider the following:
- Short Term Funds
- Medium Term Funds
- Long Term Funds
Which among the above is/ are dealt in the Indian Capital Market?
[A] 1 & 2
[B] 2 & 3
[C] 1 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: B [2 & 3]
Notes:
Short Term Funds – Indian Money Market,
Medium and Long Term Funds- Indian Capital Market
6. In what form do banks maintain the Cash Reserve Ratio (CRR)?
[A] Government Securities
[B] Physical Cash in Hand
[C] Deposits with the Reserve Bank of India
[D] A Combination of Cash and Government Securities
Show Answer
Correct Answer: C [Deposits with the Reserve Bank of India]
Notes:
Cash Reserve Ratio (CRR) is the portion of a bank’s Net Demand and Time Liabilities that must be kept as cash balances with the Reserve Bank of India. It is maintained only as a deposit with the RBI, not in government securities or cash held by the bank. The CRR rate is decided by the RBI under its monetary policy framework and can be changed from time to time. This requirement helps the central bank regulate liquidity in the banking system.
7. What is the primary operational role of MUDRA (SIDBI) Bank?
[A] Provide direct loans to micro enterprises up to ₹10 lakh
[B] Undertake refinance and support services like portal management and data analysis
[C] Establish foreign direct investment channels for Indian MSMEs
[D] Finance only high-growth manufacturing startups
Show Answer
Correct Answer: B [Undertake refinance and support services like portal management and data analysis]
Notes:
MUDRA (SIDBI) Bank operates as a refinance agency primarily providing refinance support to banks, MFIs, and NBFCs for lending to micro and small enterprises. It also provides support services such as management of financing portals and data analysis. It does not directly lend to micro enterprises. MUDRA Bank operates under the Pradhan Mantri MUDRA Yojana scheme since its formation in 2015.
8. The report of Vijay Kelkar committee is related to which of the following?
[A] Trade Reforms
[B] Centre-State Financial Relations
[C] Disinvestment in Public Sector Enterprises
[D] Tax Reforms
Show Answer
Correct Answer: D [Tax Reforms]
Notes:
Impetus to direct tax reforms in India, came with the recommendations of the Task Force on Direct & Indirect Taxes under the chairmanship of Vijay Kelkar in 2002. The main recommendations of this task force related to the direct taxes related to increasing the income tax exemption limit, rationalization of exemptions, abolition of long term capital gains tax, abolition of wealth tax etc.
9. What is output per unit of input of labor known as?
[A] Labor Productivity
[B] Production ability
[C] Capacity
[D] None of the above
Show Answer
Correct Answer: A [Labor Productivity]
Notes:
Productivity, in economics, measures output per unit of input, such as labor, capital, or any other resource – and is typically calculated for the economy as a whole, as a ratio of GDP to hours worked.
10. Which of the following are the methods of poverty estimation?
[A] Sen Index
[B] Multidimensional poverty index
[C] Poverty gap Index
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Amartya Sen, noted Nobel Laureate, has developed an index known as Sen Index to estimate the poverty.
The Global Multidimensional Poverty Index (MPI) was developed in 2010 by the Oxford Poverty & Human Development Initiative (OPHI) and the United Nations Development Programme and uses health, education, and standard of living indicators to determine the degree of poverty experienced by a population.
The poverty gap index is a measure of the intensity of poverty.
