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. The Public Debt Office acts as investment banker to which entity?
[A] Public
[B] Commercial Banks
[C] Central Bank
[D] Government
Show Answer
Correct Answer: D [Government]
Notes:
The Public Debt Office was established in 1946 as a part of the Reserve Bank of India. It manages government securities and public debt on behalf of the Government of India. The office handles the issue, interest payment, repayment, and transfer of government securities. The PDO operates in major RBI regional offices to support central and state governments in debt management operations.
12. Which among the following is correct representation of the Money Multiplier?
[A] Ratio of Broad Money (M3) to Reserved Money (M0) i.e. M3/M0
[B] Ratio of Broad Money (M3) to Narrow Money (M1) i.e. M3/M1
[C] Ratio of Narrow Money (M1) to Broad Money (M3) i.e. M1/M3
[D] Ratio of Narrow Money (M1) to Reserved Money (M0) i.e. M1/M0
Show Answer
Correct Answer: A [Ratio of Broad Money (M3) to Reserved Money (M0) i.e. M3/M0]
Notes:
The correct representation of the Money Multiplier is the ratio of Broad Money (M3) to Reserved Money (M0), expressed as M3/M0. The Money Multiplier indicates how much money supply can increase based on the reserves held by banks. M0 represents the total of a country’s physical currency, while M3 includes all liquid or near-liquid assets. This relationship is crucial in understanding monetary policy and banking operations.
13. Which is the most volatile form of foreign capital?
[A] External Commercial Borrowings
[B] Foreign Direct Investment
[C] Loans from International Financial Institutions
[D] Foreign Portfolio Investment
Show Answer
Correct Answer: D [Foreign Portfolio Investment]
Notes:
Foreign Portfolio Investment refers to investments in securities like stocks and bonds by foreign investors. FPI is highly liquid and can be withdrawn quickly. FPI inflows and outflows are sensitive to global and domestic financial conditions. Sudden withdrawal of FPI causes market volatility. FPI is termed “hot money” compared to FDI, which involves long-term capital commitments. FPI contributed to major capital outflows during financial crises.
14. Which term refers to the maximum capital a company can raise in its lifetime?
[A] Authorized Capital
[B] Registered Capital
[C] Nominal Capital
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Authorized capital is the maximum share capital stated in a company’s Memorandum of Association. Registered capital and nominal capital are alternate terms for authorized capital. This ceiling cannot be exceeded without shareholder approval and modification in company documents as per the Companies Act, 2013.
15. Which scenario best describes a Goldilocks economy?
[A] High inflation, High economic growth
[B] Low inflation, High economic growth
[C] Low inflation, Steady economic growth
[D] High inflation, Low economic growth
Show Answer
Correct Answer: C [Low inflation, Steady economic growth]
Notes:
A Goldilocks economy signifies a balance of low inflation and steady growth, avoiding extremes. The term is widely used in macroeconomics to represent optimal conditions for policy makers. It is named after the fairy tale character Goldilocks, indicating “just right” economic conditions.
16. Rolling plan was designed for which of the following periods?
[A] 1974-79
[B] 1978-83
[C] 1980-85
[D] 1985-90
Show Answer
Correct Answer: B [1978-83]
Notes:
The Janta Government terminated the fifth five year plan in 1977-78 and launched its own sixth five year plan for period 1978-83 and called it a Rolling Plan. This second plan is kept changing as per the requirements of the economy (and politics).
17. What do we call the money that is lent for more than one day but less than 15 days in the call money market?
[A] Call Money
[B] Term Money
[C] Notice Money
[D] None of the above
Show Answer
Correct Answer: C [Notice Money]
Notes:
The money that is lent for more than one day and less than 15 days in the call money market is referred to as “Notice Money”. Term Money refers to Money lent for 15 days or more in the Inter Bank Market.
18. Which of the following Five-Year Plans was terminated one year before its completion? (UPSC Prelims 1985)
[A] Second
[B] Third
[C] Fourth
[D] Fifth
Show Answer
Correct Answer: D [Fifth]
Notes:
The fifth plan was terminated by the Janta Government in 1977-78 and they launched their own sixth plan for the period 1978-83 and called it ” rolling plan” later the Janta government came down and Indira Gandhi again became prime minister of India who immediately discarded the sixth plan by the Janta government and launched her own plan for year 1980-85. The year 1978-79 was restored back to fifth plan of 1974-79.
19. What is Market equilibrium?
[A] Quantity demanded greater than quantity supplied
[B] Quantity demanded less than quantity supplied
[C] Quantity demanded equal to quantity supplied
[D] Quantity demanded is same as quantity produced
Show Answer
Correct Answer: C [Quantity demanded equal to quantity supplied]
Notes:
Market equilibrium is defined by equality between quantity demanded and quantity supplied in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.
20. Which of the following is classified as a Rabi crop?
[A] Rice
[B] Mustard
[C] Maize
[D] Cotton
Show Answer
Correct Answer: B [Mustard]
Notes:
Mustard is sown in the Rabi season from October to December and harvested between February and April. Major Rabi crops in India include wheat, barley, mustard, peas, and gram. Rabi crops grow with the help of rainwater that has percolated into the ground post-monsoon. Mustard is mainly cultivated in states like Rajasthan, Uttar Pradesh, Haryana, and Madhya Pradesh.
