Economy MCQ Quiz - Objective Question with Answer for Economy - Download Free PDF

The correct answer is Mixed farming.

Key Points

• Mixed farming is a type of farming where the land is used for both growing food and fodder crops as well as rearing livestock.
• It involves a combination of crop production and animal husbandry.
• In mixed farming systems, farmers grow crops such as wheat, maize, vegetables, fruits, etc., for food production, while also keeping livestock like cattle, sheep, goats, or poultry for meat, milk, eggs, and other by-products.
• This type of farming allows farmers to have a diversified income stream and optimize the use of available resources by integrating crop and animal production.

​Additional Information

• Dairy farming:
  • Dairy farming is a type of farming focused on the production of milk and milk products.
  • It involves raising dairy animals, typically cows, but also goats or sheep, to obtain milk that can be processed into various products such as butter, cheese, yogurt, and ice cream. 
• Plantation farming:
  • Plantation farming is a type of farming that involves the large-scale cultivation of a single crop, typically cash crops such as tea, coffee, rubber, sugarcane, palm oil, or bananas.
  • It is commonly practiced in tropical or subtropical regions with favorable climate conditions for the specific crop. 
• Commercial farming:
  • Commercial farming refers to agricultural practices that focus on producing crops or livestock for sale in the market, with the primary goal of generating profit.
  • It typically involves large-scale production and the use of modern technologies, machinery, and inputs such as fertilizers and pesticides. 

The correct answer is 15 paisa.

Key Points

• As per the Union Budget presented in Parliament by Finance Minister Nirmala Sitharaman Goods and Services Tax (GST) will contribute 17 paise in every rupee of revenue, while corporation tax will account for 15 paise.
• The Union Budget for FY 2023-24 this year aims to further strengthen India's economic status.
• In the 75th Year of India's Independence, the World has recognized the Indian Economy as a 'bright star' with its Economic Growth estimated at 7 per cent, which is the highest among all major economies.

Additional Information

• Goods and Services Tax (GST) is a value-added tax system that is implemented in many countries around the world.
• It is a comprehensive indirect tax levied on the supply of goods and services at each stage of the supply chain.
• GST aims to streamline the taxation process, reduce tax evasion, and create a unified tax structure.

The correct answer is 1, 2, and 3.More than one of the above

Key Points

• PM GatiShakti: PM GatiShkati National Master Plan
  • The seven engines that drive PM GatiShakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. Hence, Statement 1 is correct.
  • The scope of PM GatiShakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity, and logistics efficiency. Hence, Statement 2 is correct.
  • The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with the PM GatiShakti framework. Hence, Statement 3 is correct.
  • Road Transport
    • National Highways Network to be expanded by 25000 Km in 2022-23.
    • Rs 20000 Crore to be mobilized for National Highways Network expansion.
  • Multimodal Logistics Parks
    • Contracts to be awarded through PPP mode in 2022-23 for implementation of Multimodal Logistics Parks at four locations.
  • Railways
    • One Station One Product concept to help local businesses & supply chains.
    • 2000 Km of the railway network to be brought under Kavach, the indigenous world-class technology and capacity augmentation in 2022-23.
    • 400 new generation Vande Bharat Trains to be manufactured during the next three years.
    • 100 PM GatiShakti Cargo terminals for multimodal logistics to be developed during the next three years.
  • Parvatmala
    • National Ropeways Development Program, Parvatmala to be taken up on PPP mode.
    • Contracts to be awarded in 2022-23 for 8 ropeway projects of 60 Km length.

The correct answer is 1, 2 and 3 only.

Key Points

• Base Rate, MCLR, and EBR are all determined by banks as their minimum lending rate.
• Till 2016, it was the base rate, after which it became MCLR.
• MCLR is such a rate where the changes in short-term interest rates like repo rate have also to be incorporated by banks.
• Since 2019, Banks are instructed to choose one out of three rates viz. Repo Rate, the Interest rate on CDs, and that on TBs as EBR.
• Based on this EBR, banks are expected to make changes to their lending and deposit rates.
• Bank Rate is the rate at which RBI is ready to provide loans to the banks by rediscounting their commercial bills and is determined by RBI. Hence option 3 is correct.

External benchmarking of loans:

• When you borrow money from a bank, be it for purchasing a house, car or for business purposes, interest is levied based on certain methodologies approved by the Reserve Bank of India (RBI).
• At present, banks use Marginal Cost-based Lending Rate (MCLR) to arrive at their lending rate.
• Prior to this, it was the Base Rate method and the Benchmark Prime Lending Rate (BPLR).
• These were all internal benchmarks.
• Banks have been allowed to use RBI’s policy rate among other market-driven options to calculate lending rates. Hence statement 1 is incorrect.

Base rate

• Base rate is calculated on three parameters — the cost of funds, unallocated cost of resources and return on net worth.
• Hence, the rate depended on individual banks and they changed it whenever their cost of funds and other parameters changed. Hence statement 2 is incorrect.

Marginal Cost of Lending Rate (MCLR):

• It came into effect in April 2016.
• It is a benchmark lending rate for floating-rate loans.
• This is the minimum interest rate at which commercial banks can lend.
• This rate is based on four components—the marginal cost of funds, negative carry on account of cash reserve ratio, operating costs and tenor premium.
• MCLR is linked to the actual deposit rates.
• Hence, when deposit rates rise, it indicates the banks are likely to hike MCLR and lending rates are set to go up. Hence statement 3 is incorrect.

Bank rate

• Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial/cooperative banks, development banks etc. Hence statement 4 is correct.
• Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills.
• Thus, the bank rate is also known as the discount rate.
• The Bank rate is used as a signal by the RBI to the commercial banks on RBI’s thinking of what the interest rates should be.

So, the correct answer is option 3.

The correct answer is option 4.

Key Points

• Small finance banks
  • Small finance banks (SFBs) are a type of niche bank in India.
  • They can be promoted either by individuals, corporations, trusts or societies.
  • They are governed by the provisions of the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949 and other relevant statutes. Hence, Statement 2 is not correct.
  • They are established as public limited companies in the private sector under the Companies Act, 2013. Hence, Statement 3 is not correct.
  • Banks with an SFB license can provide basic banking services of acceptance of deposits and lending. Hence, Statement 1 is not correct.
  • Objectives of setting up an SFB
    • To provide financial inclusion to sections of the economy not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and unorganized sector entities
  • Key features of SFBs
    • Existing non-banking financial companies (NBFC), microfinance institutions (MFI) and local area banks (LAB) can apply to become small finance banks.
    • The banks will not be restricted to any region.
    • 75% of its net credits should be in priority sector lending and 50% of the loans in its portfolio must in ₹25 lakh. Hence, Statement 4 is correct.
    • The firms must have a capital of at least ₹200 crores.
    • The promoters should have 10 years experience in banking and finance.
    • Foreign shareholding will be allowed in these banks as per the rules for FDI in private banks in India.

The correct answer is Horticulture and Honey.

Key Points

• The Golden Revolution is related to Horticulture and Honey.
• It started in 1991 and lasted till 2003.
• Father of Golden Revolution: Nirpakh Tutaj.
• The Golden Fibre Revolution is related to Jute Production.

Additional Information

The correct answer is Russia.

Key Points

• The constitution of India has borrowed most of its provisions from the constitution of different countries in the world.
• According to Dr B R Ambedkar, the constitution of India has been framed after ransacking all the known constitutions of the world.
• The important provisions borrowed from Russia are:
  • Five-year plan.
  • Fundamental duties.

Additional Information

• The important provisions borrowed from Britain are:
  • Parliamentary form of government
  • Rule of Law.
  • Single Citizenship.
  • Office of Comptroller and Auditor General of India.
  • Bicameralism.
  • Writs.
• The important provisions borrowed from the United States are:
  • Fundamental rights.
  • Preamble.
  • Independence of judiciary.
  • Judicial review.
  • Impeachment.
  • Post of vice-president.
• The important provisions borrowed from Germany:
  • Suspension of Fundamental Rights during the emergency.

The correct answer is Primary sector.

Key Points:

• Activities that generate income are termed as economic activities.
• On the basis of economic activities, the Indian economy can be divided into 3 major sectors that are the primary sector, the secondary sector, and the tertiary sector.
• Dairy comes under the primary sector.
• Primary sector: Primary activities are directly dependent on the environment as these refer to the utilization of the earth’s resources. It, thus includes hunting and gathering, pastoral activities, fishing, apiculture, etc.
• Secondary sector: Secondary activities add value to natural resources by transforming raw materials into valuable products. Therefore, they are concerned with manufacturing, processing and construction industries. For eg: Shoe factory.
• Tertiary sector: Tertiary activities include both production and exchange. The production involves the ‘provision’ of services that are consumed. The exchange involves trade, transport and communication facilities that are used to overcome distance. For eg: Consultancy.

The correct answer is 1956-61.

Key Points

• 1956-61 was the duration of the Second Five Year Plan.
• The Second Five Year Plan was based on Mahalanobis Model.
• ​Its main focus was on the industrial development of the country.
• P. C. Mahalanobis was a famous Indian statistician who founded the Indian Statistical Institute.
• The plan lagged behind the target growth rate of 4.5% and achieved a growth rate of 4.27%.

Additional Information

• The five-year plans were one of the central plans.
• The plans were formulated and were financed by the central government.
• These were launched in 1951, with the first five-year plans covering the years 1951-56.
• There were three breaks in five-year plans during 1966-69, 1978-80, and 1991-92.
• "Twelfth Five Year Plan" duration is from 2012 to 2017, and it was under the leadership of Manmohan Singh.
• It was the last five-year plan because Niti Aayog replaced it with the planning commission.
• Its main theme was “Faster, More Inclusive and Sustainable Growth”.
• Its growth rate target was 8%.​

​

The correct answer is Ellora Caves.

Key Points

• In April 2019, RBI issued new Rs. 20 currency notes in the Mahatma Gandhi (New) series. 
• The new Rs 20 notes have the signature of the Reserve Bank's Governor.
• The base colour of the new note is Greenish Yellow.
• The new (Rs 20) denomination has the motif of Ellora Caves on the reverse side of the note.
• The dimension of the banknote will be 63 mm x 129 mm.

Additional Information

The correct answer is Third five year plan.

Key Points

• The third Five Year Plan was launched from 1961-1966 under the leadership of Pandit Jawaharlal Nehru.
  • The Deputy Chairman of the Planning commission at the time of the third five-year plan was D. R. Gadgil.
  • The plan was also known as the Gadgil Yojana.
  • The independent economy (establishment of a self-reliant and self-generating economy), agriculture, and improvement in the production of wheat were the major objectives of the plan.
  • The third Five Year Plan was affected due to drought and two wars (Sino-India war of 1962 and Indo-Pakistani war of 1965).

Additional Information

• The First five-year plan 
  • This plan was launched from 1951-1956 under the leadership of Pandit Jawaharlal Nehru.
  • It was based on the Harrod-Domar model.
  • The targeted growth rate of the plan was 2.1%.
  • The plan was successful and achieved a growth rate of 3.6% which was more than its target.
  • The agricultural development of the country was the major objective of the plan.
  • At the end of this plan, five IITs were set up in the country.
• The second five-year plan
  • ​​​This plan is based on P.C Mahalanobis Model.
  • It was planned from 1 April 1956 to 31 March 1961.
  • It is popularly known as Mahalanobis Plan.
  • The second five-year plan accords high priority to industrialization, and especially to the development of basic and heavy industries.
  • This plan includes substantial investment in iron and steel, coal and Heavy engineering, Machine building, Heavy chemicals, and Cement Industries.​
• ​Fourth-Five year Plan:
  • ​The duration of this Plan is 1969-1974 under the leadership of Indira Gandhi.
  • The two main objectives of this Plan are growth with Stability and Progressive achievement with self-reliance.
  • During this Plan, 14 major Indian Banks were nationalized and the Green Revolution was started.
  • At this time, the Indo-Pak war of 1971 and the Bangladesh liberation war took Place.
  • The main emphasis was on the growth rate of agriculture to enable other sectors to move forward.
  • First, two years of the plan saw record production.
  • The last three years did not measure up due to poor monsoon.
  • Implementation of Family Planning Programmes was amongst the major targets of the Plan.

Important Points

The correct answer is Fourth Five-year Plan - Family planning programme

Key Points

• Fourth Five-Year Plan (1969-1974)
  • The fourth Five Year Plan was the first plan launched by the Indira Gandhi government amid the pressure of drought, devaluation, and inflationary recession.
  • The country was fighting with population explosion, increased unemployment, poverty, and a shackling economy. In addition, the situation in East Pakistan (now independent Bangladesh) was becoming dire as the Indo-Pakistani War of 1971 and the Bangladesh Liberation War took place.
  • Funds earmarked for industrial development had to be used for the war effort.
  • The result was that this plan period was also no better than the third five-year plan.
  • It gave emphasis on Family planning programs to control the population.​

Additional Information

The correct answer is option 4 i.e 1950.

Key Points

• The Planning Commission was an institution which formulated Five-Year Plans in India.
  • Planning Commission set up in 1950.
  • Planning commission was established based on the recommendation of an advisory planning board under the chairmanship of KC Neogy.
  • Headquarters: Yojana Bhavan, New Delhi.
  • Planning commission is only an advisory body.
  • The concept of planning was based on the Russian model introduced by Joseph Stalin.
  • The Prime Minister is the chairman of the planning commission.
  • Jawaharlal Nehru was the first chairman of the planning commission.
  • Deputy chairman of the planning commission was appointed by the Union Cabinet.
  • Gulzarilal Nanda was the first deputy Chairman of the Planning Commission.
• Narendra Modi government dissolved the Planning Commission in 2014.
• The planning commission was replaced by the newly formed NITI Aayog in 2015.

The correct answer is Custom duties.

Important Points

• The tax imposed on the import and export of commodities is called Custom duties.
• This is a form of foreign trade control and a policy that taxes foreign goods to encourage or protect domestic industry.
• Tariffs may be set (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies by price). Import taxation means that consumers are less likely to purchase them because they are more costly.
• An excise tax is an indirect tax on the sale of a particular good or service charged by the Government.
• A VAT (Value-added tax) is a consumption tax that is imposed on a product whenever a value is added at each stage of the supply chain, from production to point of sale.
• Goods and Services Tax(GST) is an Indirect tax on the purchase of goods and services used in India.

The correct answer is Second Five Year Plan.

Key Points

• Second Five-year plan (1956 to 1961)
  • The second plan was conceived in an atmosphere of economic stability.
  • It was felt agriculture could be accorded lower priority. 
  • Industries got more importance in the 2nd five-year plan. The focus was mainly on heavy industries. 
  • The Indian government boosted the manufacturing of industrial goods in the country.
  • This was done primarily to develop the public sector.
  • The Plan Focussed on rapid industrialization- heavy & basic industries.
  • Advocated huge imports through foreign loans.
  • Therefore, the Indian Government adopted a mixed economy during the second five-year plan. Hence, Option 2 is correct.
  • The Industrial Policy 1956 was based on the establishment of a socialistic pattern of society as the goal of economic policy.
  • Acute shortage of forex led to pruning of development targets, the price rise was also seen ( about 30%) vis a vis decline in the earlier Plan & the 2nd FYP was only moderately successful.

Important Points

• The 2nd year five-year plan functioned based on the Mahalanobis model. 
• The Mahalanobis model was propounded by the famous Prasanta Chandra Mahalanobis in the year 1953.
• As many as five steel plants including the ones in Durgapur, Rourkela ,Bhilai were set up as per the 2nd five-year plan. 
• During the term of the 2nd five-year plan, Atomic Energy Commission came into being.
• The Commission was established in the year 1957. 
• During the same period, the Tata Institute of Fundamental Research was born.

Additional Information

• First Five Year Plan:
  • It was launched from 1951 to 1956, under the leadership of Jawaharlal Nehru. 
  • It was based on the Harrod-Domar model with a few modifications. 
  • Its main focus was on the agricultural development of the country.
  • This plan was successful and achieved a growth rate of 3.6% (more than its target of 2.1%). 
  • At the end of this plan, five IITs were set up in the country. 
• Third Five Year Plan:
  • It was made from 1961 to 1966.
  • It is also called ‘Gadgil Yojna’, after the Deputy Chairman of Planning Commission D.R. Gadgil.
  • The target of this plan was to make the economy independent.
  • The stress was laid on agriculture and the improvement in the production of wheat. 
  • India was engaged in two wars: (1) the Sino-India war of 1962 and (2) the Indo-Pakistani war of 1965. These wars exposed the weakness in our economy and shifted the focus to the defense industry, the Indian Army, and the stabilization of the price (India witnessed inflation). 
  • The plan was a flop due to wars and drought. The target growth was 5.6% while the achieved growth was 2.4%. 
• Fourth Five Year Plan:
  • Its duration was from 1969 to 1974, under the leadership of Indira Gandhi. 
  • The two main objectives of this plan i.e. growth with stability and progressive achievement of self-reliance.
  • Fourteen major Indian banks were nationalized and the Green Revolution was started.
  • Indo-Pakistani War of 1971 and the Bangladesh Liberation War took place. 
  • Implementation of Family Planning Programmes was amongst major targets of the Plan
  • It failed and could achieve a growth rate of 3.3% only against the target of 5.7%.