UPSC (Prelims) 2020 Indian Economy MCQ Questions

If the RBI decides to adopt an expansionist monetary policy, which of the following would it NOT do?

1. Cut and optimise the Statutory Liquidity Ratio.
2. Increase the Marginal Standing Facility Rate.
3. Cut the Bank Rate and Repo Rate.
   Select the correct answer using the code given below:
   (a) 1 and 2 only
   (b) 2 only
   (c) 1 and 3 only
   (d) 1, 2 and 3

With reference to the history of India, the Parivrajan system refers to which one of the following?
(a) The value of Indo-Sri Lanka trade has consistently increased in the last decade.
(b) Textile and textile articles constitute the largest item of trade between India and Bangladesh.
(c) In the last five years, Nepal has been the largest trading partner of India in South Asia.
(d) None of the above

Consider the following statements:

1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to determine the key policy rates.
   Which of the statements given above is/are correct?
   (a) 1 and 2 only
   (b) 2 only
   (c) 3 only
   (d) 1, 2 and 3

Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes?

1. Working capital for maintenance of farm assets
2. Purchase of combine harvesters, tractors and mini trucks
3. Consumption requirements of farm households
4. Post-harvest expenses
5. Construction of family house and setting up of village cold storage facility
   Select the correct answer using the code given below:
   (a) 1, 2 and 5 only
   (b) 1, 3 and 4 only
   (c) 2, 3, 4 and 5 only
   (d) 1, 2, 3, 4 and 5

In India, which of the following can be considered as public investment in agriculture?

1. Fixing Minimum Support Price for agricultural produce
2. Computerisation of Primary Agricultural Credit Societies
3. Social Capital development
4. Free electricity supply to farmers
5. Waiver of agricultural loans from the banking system
6. Setting up of cold storage facilities by the government
   Select the correct answer using the code given below:
   (a) 1, 2 and 5 only
   (b) 1, 3, 4 and 6 only
   (c) 2, 3 and 6 only
   (d) 1, 2, 5 and 6 only

Which one of the following is the meaning of the term 'Interest Coverage Ratio' of a firm in India?
(a) It helps in understanding the present risk of a firm that a bank is going to give loan to.
(b) It helps in evaluating the emerging risk profile of a firm that a bank is going to give loan to.
(c) The higher a borrowing firm's level of Interest Coverage Ratio, the worse is the firm's ability to service its debt.
(d) requirement of fossil fuels for a country to provide goods and services to the citizens, based on the burning of those fuels.

In India, which of the following can be considered as public investment in agriculture?

1. Fixing Minimum Support Price for agricultural produce
2. Computerisation of Primary Agricultural Credit Societies
3. Social Capital development
4. Free electricity supply to farmers
5. Waiver of agricultural loans from the banking system
6. Setting up of cold storage facilities by the government
   Select the correct answer using the code given below:
   (a) 1, 2 and 5 only
   (b) 1, 3 and 4 and 6 only
   (c) 2, 3 and 6 only
   (d) 1, 2, 5 and 6 only

Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes?

1. Working capital for maintenance of farm assets
2. Purchase of combine harvesters, tractors and mini trucks
3. Consumption requirements of farm households
4. Post-harvest expenses
5. Construction of family house and setting up of village cold storage facility
   Select the correct answer using the code given below:
   (a) 1, 2 and 5 only
   (b) 1, 3 and 4 only
   (c) 2, 3, 4 and 5 only
   (d) 1, 2, 3, 4 and 5

Consider the following statements:

1. In the context of the Indian economy, 'Commercial Paper' is a short-term unsecured promissory note.
2. 'Certificate of Deposit' is a long-term instrument issued by the Reserve Bank of India to a corporation.
3. 'Call Money' is a short-term finance used for interbank transactions.
   Which of the statements given above is/are correct?
   (a) 1 only
   (b) 1 and 2 only
   (c) 1 and 3 only
   (d) 2 and 3 only

With reference to the Indian economy after the 1991 economic liberalization, consider the following statements:

1. Worker productivity (₹ per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas.
2. The percentage share of rural areas in the workforce steadily increased.
   Select the answer using the code:
   (a) 1 and 2 only
   (b) 3 and 4 only
   (c) 3 only
   (d) 1, 2, 3 and 4

Along with the Budget, the Finance Minister also places other documents before the Parliament which include 'The Macro Economic Framework Statement'. The aforesaid document is presented to Parliament as it is mandated by:
(a) Long standing parliamentary convention
(b) Article 112 and Article 110(1) of the Constitution of India
(c) Article 113 of the Constitution of India
(d) Provisions of the Fiscal Responsibility and Budget Management Act, 2003

With reference to the Indian economy after the 1991 economic liberalization, consider the following statements:

1. Worker productivity (₹ per worker) at 2004-05 prices) increased in urban areas while it decreased in rural areas.
2. The percentage share of rural areas in the workforce steadily increased.
3. In rural areas, the growth in non-farm economy increased.
4. The growth rate in rural employment decreased.
   Which of the statements given above is/are correct?
   (a) 1 and 2 only
   (b) 3 and 4 only
   (c) 3 only
   (d) 1, 2, 3 and 4

The term 'West Texas Intermediate', sometimes found in news, refers to a grade of:
(a) Crude oil
(b) Bullion
(c) Rare earth elements
(d) Uranium

In the context of the Indian economy, which of the following is/are the purpose/purposes of 'Statutory Reserve Requirements'?

1. To enable the Central Bank to control the amount of advances the banks can create.
2. To make the commercial banks risk-free and viable.
3. To ensure that the banks have always a minimum reserve of money.
   Select the correct answer using the code given below:
   (a) 1 only
   (b) 1 and 2 only
   (c) 2 and 3 only
   (d) 1, 2 and 3

In the context of the Indian economy, non-financial debt includes which of the following?
(i) Housing loans owed by households
(ii) Amounts outstanding on credit cards
(iii) Treasury bills
Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 1, 2 and 3

With reference to Foreign Direct Investment in India, which of the following is considered as major characteristic?
(a) It is investment through capital instruments essentially in a listed company.
(b) It is in a largely non-debt creating foreign capital.
(c) It is the investment which involves debt-servicing.
(d) It is the investment made by foreign institutional investors in the Government securities.

If you withdraw ₹1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be:
(a) to reduce it by ₹1,00,000
(b) to increase it by ₹1,00,000
(c) to increase it by more than ₹1,00,000
(d) to leave it unchanged

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give greater immunity to India?

1. Not depending on short-term foreign borrowings
2. Opening up to more foreign banks
3. Maintaining full capital account convertibility
   Select the correct answer using the code given below:

'Gold Tranche' (Reserve Tranche) refers to:
(a) a loan system of the World Bank
(b) one of the operations of a Central Bank
(c) a credit system granted by WTO to its members
(d) a credit system granted by IMF to its members