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 qualitative tool of monetary policy?
[A] Bank Rate
[B] Credit Ceiling
[C] Credit rationing
[D] Cash Reserve Ratio
Show Answer
Correct Answer: C [Credit rationing ]
Notes:
The quantitative instruments are Open Market Operations, Liquidity Adjustment Facility (Repo and Reverse Repo), Marginal Standing Facility, SLR, CRR, Bank Rate, Credit Ceiling etc.
On the other hand, qualitative instruments are: credit rationing, moral suasion and direct action (by RBI on banks).
12. What is the correct definition of an inflationary gap?
[A] The difference between the price of a product at two times
[B] The difference between actual GDP and potential GDP when actual GDP exceeds potential GDP
[C] The difference between national expenditure and total expenditure
[D] The difference between estimated fiscal deficit and actual fiscal deficit
Show Answer
Correct Answer: B [The difference between actual GDP and potential GDP when actual GDP exceeds potential GDP]
Notes:
An inflationary gap exists when actual GDP exceeds potential GDP. This describes an economic condition where production surpasses the sustainable full employment level, creating excess demand over supply. The concept was introduced by John Maynard Keynes. The inflationary gap is calculated as Actual GDP minus Potential GDP. This situation generally leads to increased prices and inflationary pressures in the economy.
13. Which among the following is the primary difference between a free trade area and a customs union?
[A] members of a free trade area adopt a common set of barriers for trade between the members
[B] a free trade area is considered a trade bloc and a customs union is not
[C] members of a customs union adopt a common set of external trade barriers
[D] a free trade area can include parts of a country and a customs union includes entire countries
Show Answer
Correct Answer: C [ members of a customs union adopt a common set of external trade barriers ]
Notes:
The primary difference between a free trade area and a customs union is that members of a customs union adopt a common set of external trade barriers. In a free trade area, member countries eliminate tariffs among themselves but maintain their own external tariffs. Examples include NAFTA (now USMCA) as a free trade area and the European Union as a customs union, which has a unified external tariff policy.
14. 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.
15. Bangladesh is India’s main competitor in the export of which product? (UPSC Prelims 1991)
[A] Cotton garments
[B] Jute
[C] Cement
[D] Pharmaceuticals
Show Answer
Correct Answer: B [Jute]
Notes:
Bangladesh, known for its ‘Golden Fiber’, is the world’s second-largest jute producer after India. It strongly competes with India in global jute exports, often surpassing India due to export restrictions and price competitiveness. Both nations make up over half the worldwide jute market.
16. In which of the following circumstances, the total utility is maximum?
[A] Marginal utility is maximum
[B] Marginal utility = 0
[C] Marginal utility is minimum
[D] None of the above
Show Answer
Correct Answer: B [Marginal utility = 0]
Notes:
Total Utility is the sum of all the utilities derived from the consumption of all the units of a particular commodity. So when the marginal utility decreases total utility increases and is maximum when marginal utility is 0.
17. Which among the following best describes scarcity in economics?
[A] Low demand for good
[B] High demand and less supply of good
[C] Low demand as people don’t want to consume it
[D] Goods available are not free
Show Answer
Correct Answer: D [Goods available are not free]
Notes:
Scarcity means limited goods are for more number of people. In an Economy the resources are scarce and the wants are unlimited.
18. Which sector contributed most to India’s National Income in 2025-26?
[A] Unorganised
[B] Public
[C] Organised
[D] None of the above
Show Answer
Correct Answer: A [Unorganised]
Notes:
The unorganised sector dominates India’s national income, with over 31 crore registered workers as of Jan 2026. GVA per establishment nearly doubled between 2010-11 and 2023-24. Unorganised sector accounts for a majority workforce, especially in services, reflecting ongoing structural shifts in India’s economy.
19. What is growing of 2 crops in alternate rows known as?
[A] Relay cropping
[B] Row cropping
[C] Mixed cropping
[D] None of the above
Show Answer
Correct Answer: B [Row cropping]
Notes:
Row intercropping is cropping that involves the component crops arranged in alternate rows. The benefit of this includes the optimum utilization of land space and suppression of weeds during the juvenile stage of the main crop.
20. Which Northeastern state has the highest forest cover by percentage of area?
[A] Mizoram
[B] Arunachal Pradesh
[C] Assam
[D] Meghalaya
Show Answer
Correct Answer: A [Mizoram]
Notes:
Mizoram’s forest cover is 85.34% of its total geographical area as per ISFR 2023. Arunachal Pradesh’s percentage is 79.89, Meghalaya’s is 76.33, and Assam’s is 35.22. Mizoram is the highest among these northeastern states and all Indian states for percentage forest cover after union territory Lakshadweep. The Forest Survey of India conducts assessments biennially.
