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.
11. Which action increases cash reserves of commercial banks by RBI?
[A] Release gold from its reserves
[B] Purchase government securities in open market operations
[C] Prohibit bills of exchange transactions
[D] Increase IMF tranche reserves
Show Answer
Correct Answer: B [Purchase government securities in open market operations]
Notes:
The Reserve Bank of India increases cash reserves of commercial banks by purchasing government securities through open market operations. When government securities are purchased, funds are transferred to commercial banks, raising their cash reserves. OMOs are used by the RBI as a monetary policy instrument to regulate liquidity and money supply. As of 2023, RBI actively uses OMOs to manage system liquidity.
12. Consider the following fiscal policy measures that a government might adopt to combat inflation:
- Decreasing public expenditure
- Reducing public debt
- Delaying the payment of old debts
- Increasing taxes
Which of the above are correct selective measures?
[A] Only 1, 2 and 3
[B] Only 2, 3 and 4
[C] Only 1, 2 and 4
[D] Only 1, 3 and 4
Show Answer
Correct Answer: D [Only 1, 3 and 4]
Notes:
Decreasing public expenditure and increasing taxes are classic contractionary fiscal measures to reduce demand and combat inflation. Delaying debt payments helps conserve resources for these fiscal actions. However, reducing public debt is not a direct anti-inflation measure, as it does not immediately affect aggregate demand. Thus, 1, 3 and 4 are correct selective anti-inflation fiscal measures.
13. Which of the following is used by RBI for sterilization of the Capital Inflows?
[A] Base Rate System
[B] CRAR Obligations
[C] Open Market Operations
[D] Credit Authorization Scheme
Show Answer
Correct Answer: C [ Open Market Operations ]
Notes:
An open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks. The central bank can either buy or sell government bonds in the open market.
14. What does a decreasing agricultural sector share in GDP indicate for a country?
[A] The country is heading toward developed nation status
[B] The country is becoming a developing nation
[C] The country is becoming less developed
[D] Agricultural production has completely stopped
Show Answer
Correct Answer: A [The country is heading toward developed nation status]
Notes:
The agricultural sector’s GDP share typically declines as countries industrialize and modernize. In 2023, developed economies like the United States had agriculture contributing less than 1% to GDP. In developing nations, the sector’s share is higher—such as Kenya at around 33%. A falling agricultural share indicates structural transformation toward an industrial and service-based economy.
15. What is an Indian Depository Receipt (IDR)?
[A] A deposit account with a public sector bank.
[B] A depository account with Indian depositories.
[C] An instrument in the form of a depository receipt.
[D] An instrument in the form of deposit receipt issued by Indian depositories.
Show Answer
Correct Answer: C [An instrument in the form of a depository receipt.]
Notes:
An Indian Depository Receipt (IDR) is a financial instrument denominated in Indian Rupees, issued by a domestic depository against the equity shares of a foreign company. IDRs are listed and traded on Indian stock exchanges. The concept was introduced under Section 605A of the Companies Act, 1956 and regulated by SEBI. The first IDR was issued by Standard Chartered PLC in 2010.
16. Which option best represents a person’s overall financial wealth?
[A] Bank balance
[B] Capital
[C] Assets
[D] Net worth
Show Answer
Correct Answer: D [Net worth]
Notes:
Net worth equals total assets minus total liabilities. It includes properties, financial investments, cash, and all debts. Net worth calculation is used for individuals, companies, and governments to assess overall financial position. The term is commonly used in balance sheets and personal financial statements. As of 2024, net worth remains the primary financial indicator in banking, accounting, and wealth management sectors globally.
17. When is a consumer said to be in equilibrium?
[A] He can fulfil needs without consuming certain items
[B] He is able to fulfill needs with a given income
[C] He can locate new income sources
[D] He lives in full comfort with a given income
Show Answer
Correct Answer: B [He is able to fulfill needs with a given income]
Notes:
Consumer equilibrium occurs when marginal utility per rupee spent is equal across goods, ensuring maximum satisfaction from available income. This concept is central in utility theory of consumer behavior in economics.
18. Which Asian country recently introduced a sustainable development fee for tourists?
[A] Thailand
[B] Bhutan
[C] Cambodia
[D] Sri Lanka
Show Answer
Correct Answer: B [Bhutan]
Notes:
Bhutan imposes a Sustainable Development Fee on international tourists, except those from India, Bangladesh, and the Maldives. The current rate is USD 100 per person per night, effective from September 1, 2023 to August 31, 2027, as a 50% discount from the earlier USD 200. Indian tourists pay INR 1,200 per person per night. The fee funds conservation and infrastructure.
19. Where is the headquarters of the United Nations World Tourism Organization (UNWTO) located?
[A] Paris
[B] Madrid
[C] New York
[D] Geneva
Show Answer
Correct Answer: B [Madrid]
Notes:
The World Tourism Organization (UNWTO) is the United Nations agency responsible for the promotion of sustainable and universally accessible tourism. Its headquarters is located at Madrid, Spain.
20. Which of the following is correct for economic efficiency?
[A] Increase in economic acitivty in an economy
[B] Use of resources to maximize the production of goods and services
[C] Distribution of economic resources in fair and equitable manner
[D] Maximum usage of resources for maximum production of goods
Show Answer
Correct Answer: B [Use of resources to maximize the production of goods and services]
Notes:
Economic Efficiency is the use of resources so as to maximize the production of goods and services. Resources are scarce and there are unlimited wants so economic efficiency is key in development.
