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. If the demand and supply of a commodity increase by an equal absolute amount, what will be the effect on market price?
[A] Increase
[B] Decrease
[C] Remain Stable
[D] First decrease then increase
Show Answer
Correct Answer: C [Remain Stable]
Notes:
When the market is in equilibrium, and when the demand and supply of a commodity increase by an equal absolute amount, the market price will not increase, rather it will remain stable.
2. Which among the following organizations calculates and publishes LIBOR (London Interbank Offered Rate)?
[A] Bank of England
[B] Thomson Reuters
[C] European Banking Federation
[D] European Central Bank
Show Answer
Correct Answer: B [Thomson Reuters]
Notes:
The London Inter-bank Offered Rate (LIBOR) is the average interest-rate calculated from estimates submitted by the leading banks in London. The rates are calculated and published by Thomson Reuters Corporation.
3. Which among the following can not be called an antiinflationary measure?
[A] Raising the Bank Rates
[B] Raising the Reserve Ratio Requirements
[C] Purchase of securities in the Open Markets
[D] Rationing of the Credit
Show Answer
Correct Answer: C [Purchase of securities in the Open Markets]
Notes:
The correct answer is “Purchase of securities in the Open Markets.” This action is part of an expansionary monetary policy, aimed at increasing money supply and stimulating the economy, which can lead to inflation. In contrast, raising bank rates and reserve ratio requirements are contractionary measures that help control inflation by reducing money supply. Rationing of credit also limits borrowing, thus curbing inflationary pressures.
4. Consider the following:
- Reverse Repo Rate
- Cash Reserve Ratio
- Statutory Liquidity Ratio
- Bank Rate
An increase in which among the above could raise the interest rates in the market?
[A] 1
[B] 1 & 2
[C] 1, 2 & 3
[D] 1, 2, 3 & 4
Show Answer
Correct Answer: D [1, 2, 3 & 4]
Notes:
The Reserve Bank uses various policy levers, such as repo rate, reverse repo rate, cash reserve ratio, statutory liquidity ratio and bank rate, to influence the amount of money in the market. An increase in any one of these could raise the interest rates.
5. In economy, which among the following can be measured by calculating concentration ratios?
[A] Devlopment
[B] Inflation
[C] Competition
[D] Social Security
Show Answer
Correct Answer: C [Competition]
Notes:
Competition is generally measured by calculating concentration ratios. Concentration ratios indicate whether an industry consists of a few large firms or many small firms. Two of the most commonly used metrics are the Herfindahl Hirschman Index (HHI) and the N-firm concentration ratio.
6. Consider the following statements:
1. In comparison to other products, stocks markets offer higher returns and pose higher risks
2. Stock prices are governed by supply and demand
Which among the above is / are correct statements?
[A] Only 1
[B] Only 2
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: C [ Both 1 & 2 ]
Notes:
Historically, investors earned higher returns from stocks than from other products. As return and risk are correlated, they were also exposed to higher risks. To absorb this risk, you need superior analytical skills, deeper pockets to diversify across the market and essentially, the right attitude to book losses or profits. Intelligent investing in stocks is therefore, never easy. You can buy stocks either in the primary market or in the secondary market. You need to be doubly sure that you are investing in a fundamentally sound company before writing the cheque for an IPO. Buying shares in secondary market can be done only through a registered broker or a sub-broker. Stock markets are places where buyers and sellers of stock meet to trade. The NSE and BSE is the most important exchanges in India. Stock prices change according to supply and demand. There are many factors influencing prices, the most important being earnings. There is no consensus as to why stock prices move the way they do.
7. Open market operations (OMO):
- act as a monetary tool of RBI
- are conducted for the sale or purchase of government securities
Which of the above statements is/are correct?
[A] 1 Only
[B] 2 Only
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: C [Both 1 & 2]
Notes:
Both are correct statementsRBI conducts open market operations by selling government securities in order to maintain ample liquidity in the system.
8. Which is the leading state in India in ship breaking industry?
[A] Gujarat
[B] West Bengal
[C] Andhra Pradesh
[D] Jharkhand
Show Answer
Correct Answer: A [Gujarat ]
Notes:
Alang is a census town in Bhavnagar district in the Indian state of Gujarat. In the past three decades, its beaches have become a major worldwide centre for ship breaking. The longest ship ever built, Seawise Giant, was sailed to and beached here for demolition in December 2009.
9. In which of the following case, law of demand fails?
[A] Giffen goods
[B] Normal goods
[C] Inferior goods
[D] Both Giffen and Inferior goods
Show Answer
Correct Answer: A [Giffen goods]
Notes:
A Giffen good, in economic theory, is a good that is in greater demand as its price increases. For example, if the price of an essential food staple, such as rice, rises it may mean that consumers have less money to buy more expensive foods, so they will actually be forced to buy more rice.
10. Which of the following is the reason for making national income computation difficult in India?
[A] Large population growth
[B] Very low per capita income
[C] Very little domestic savings
[D] Existence of non-monetizes sectors
Show Answer
Correct Answer: D [Existence of non-monetizes sectors]
Notes:
The soundness of national income estimates is affected badly if there exist a large non- monetized sector. This creates valuation problem. Also illegal forms of economic activity and illegal activities that are not reported to the authority for the purpose of paying taxes are left out from national income accounts.
