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 among the following is a nearest term to Pay Order?
[A] Bank Draft
[B] Banker’s Cheque
[C] Bill of Exchange
[D] Promissory Note
Show Answer
Correct Answer: B [ Banker’s Cheque ]
Notes:
A Pay Order is similar to a Banker’s Cheque, as both are instruments issued by banks guaranteeing payment to a specified payee. Unlike a Bank Draft, which can be issued by individuals, a Banker’s Cheque is always issued by the bank itself. Both are considered safer than cash and are used for transactions where the payee requires guaranteed funds.
12. Which among the following is the guiding principle of the concept of most favoured nations?
[A] that every nation has a preferred trading partner
[B] that nations should cooperate with other nations that cooperate with them
[C] non-discrimination among trading partners
[D] that each nation should be able to decide what other nations it prefers as trading partners
Show Answer
Correct Answer: C [ non-discrimination among trading partners ]
Notes:
The guiding principle of the Most Favoured Nation (MFN) concept is “non-discrimination among trading partners.” This principle, established in international trade agreements, ensures that any favorable trading terms offered by one country to another must be extended to all other trading partners. This concept is a cornerstone of the World Trade Organization (WTO) framework, promoting equality and preventing trade discrimination. The MFN principle aims to create a level playing field in international trade, fostering global economic cooperation.
13. Which of the following activities can help to reduce the government’s budget deficit?
- Implementation of Goods and Services Tax (GST)
- Rationalization of Subsidies
- Reduction in Income Tax
Select the correct option from codes given below:
[A] 1 & 2 Only
[B] 3 Only
[C] 2 & 3 Only
[D] 1, 2 & 3
Show Answer
Correct Answer: A [ 1 & 2 Only ]
Notes:
Implementation of Goods and Services Tax (GST) could help government raise tax revenues and reduce fiscal deficit. Fiscal deficit can be reduced by rationalizing subsidies in different sectors. Reduction in Income Tax will reduce government’s earnings and hence will increase budget deficit.
14. Consider the following statements regarding the Asian Infrastructure Investment Bank (AIIB):
- India participated in the founding of the bank and signed the Memorandum of Understanding in October 2014.
- The headquarters of the AIIB are located in Beijing, China, specifically at the Asia Financial Center in the Olympic Forest Park area.
- The AIIB currently has over 100 member states from around the world.
Which of the above statements is/are correct?
[A] Only 1
[B] 1 and 2 only
[C] 2 and 3 only
[D] 1, 2 and 3
Show Answer
Correct Answer: D [1, 2 and 3]
Notes:
All three statements are correct. India was among the founding members of the AIIB and signed the MoU in October 2014. The bank’s headquarters are indeed located in Beijing’s Asia Financial Center in the Olympic Forest Park area. As of now, AIIB has 111 members (including prospective members) from different continents, confirming it has over 100 member states.
15. RBI’s intervention to influence the exchange rate is known as what in India?
[A] Dirty Floats
[B] Managed Floats
[C] Fixed Floats
[D] Market Stabilization Floats
Show Answer
Correct Answer: B [Managed Floats]
Notes:
India has used a managed floating exchange rate regime since 1993. The Reserve Bank of India intervenes in the foreign exchange market to reduce excessive volatility. The exchange rate is mainly market-determined but subject to RBI intervention. The International Monetary Fund describes India’s regime as a managed float. RBI does not follow a fully fixed or fully floating rate policy.
16. Which of the following was the operational period of 12th Five Year Plan?
[A] 2007–12
[B] 2012–17
[C] 2015–20
[D] 2005–10
Show Answer
Correct Answer: B [2012–17]
Notes:
Twelfth Plan (2012–2017) of the Government of India has been decided to achieve a growth rate of 8.2% but the National Development Council (NDC) on 27 December 2012 approved a growth rate of 8% for the Twelfth Five-Year Plan.
17. What is the purpose of Ways and Means Advances scheme?
[A] to give insurance to the large corporates for their investment in abroad projects
[B] to handle the mismatch between cash flow of the receipts and payments of the State Governments
[C] to promote export oriented projects by giving interest free credit
[D] None of the above
Show Answer
Correct Answer: B [to handle the mismatch between cash flow of the receipts and payments of the State Governments]
Notes:
Ways and means advances (WMA) is a mechanism used by Reserve Bank of India (RBI) to help the states tide over temporary mismatches in the cash flow of their receipts and payments.
18. On the basis of distribution, resources can be classified into which of the following?
[A] Potential resources
[B] Ubiquitous resources
[C] Actual resources
[D] Abiotic resources
Show Answer
Correct Answer: B [Ubiquitous resources]
Notes:
A ubiquitous resource is a natural resource that is available just about anywhere you live. Air, wind, water are all ubiquitous resources. Localized resources are natural resources only found in certain places.
19. Why is full convertibility of the Indian rupee advocated? (UPSC Prelims 1996)
[A] It stabilizes the rupee’s exchange value globally.
[B] It attracts more foreign capital into India.
[C] It helps promote Indian exports.
[D] It helps India secure loans on attractive terms.
Show Answer
Correct Answer: A [It stabilizes the rupee’s exchange value globally.]
Notes:
Full convertibility allows the rupee to be freely exchanged with foreign currencies for all transactions at market rates without Reserve Bank of India restrictions. India achieved current account convertibility in 1994. Full capital account convertibility is under consideration. Currency stability and reduced exchange rate uncertainty are key reasons for advocating convertibility to stabilize the rupee’s value against global currencies.
20. Which of the following is important for a traditional economic system?
[A] History
[B] social welfare
[C] profit
[D] trade
Show Answer
Correct Answer: A [History]
Notes:
A traditional economy is based on a traditional approach. These economies are based on ancient rules and are the most basic type of economy. The focus in a traditional economy is only on the goods and services that match their customs, beliefs, and history.
