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

The correct answer is - 1999

Key Points

• European Monetary Union (EMU)
  • The European Monetary Union was formally established in 1999.
  • The EMU involves the coordination of economic and fiscal policies, a common monetary policy, and the euro as the common currency.
  • In 1999, the euro was introduced as a virtual currency for accounting purposes and electronic payments.
  • The physical euro banknotes and coins were introduced later, in 2002.

The correct answer is: mid 1970s to mid 1980s

Key Points

• Second Phase of Green Revolution
  • The second phase of the Green Revolution in India focused on the period from the mid-1970s to the mid-1980s.
  • This phase emphasized the expansion of the Green Revolution to more diverse regions and crops beyond the initial focus on wheat and rice.
  • It involved the introduction of high-yielding varieties of other crops, improvements in irrigation, and better use of fertilizers and pesticides.
  • The goal was to achieve self-sufficiency in food grains and to address regional disparities in agricultural productivity.

Additional Information

• Other Options
  • Mid 1960s to mid 1970s
    • This period marks the first phase of the Green Revolution in India, focusing primarily on the introduction of high-yielding varieties of wheat and rice.
    • It was characterized by the initial success in increasing food grain production and achieving food security.
  • Mid 1950s to mid 1960s
    • This period predates the Green Revolution in India, which began in the mid-1960s.
    • Agricultural practices during this time were more traditional and did not involve the significant technological advancements seen later.
  • Mid 1980s to mid 1990s
    • This period follows the second phase and focuses on the continuation and consolidation of the gains made during the Green Revolution.
    • It includes efforts to address the environmental and socio-economic challenges that arose from the Green Revolution practices.

The correct answer is - (D), (C), (B), (A)

Key Points

• (D) MRTP
  • The Monopolies and Restrictive Trade Practices (MRTP) Act was enacted in 1969.
  • It aimed to prevent concentration of economic power, control monopolies, and restrict unfair trade practices.
• (C) FERA
  • The Foreign Exchange Regulation Act (FERA) was introduced in 1973.
  • FERA was designed to regulate foreign exchange and ensure the judicious use of foreign exchange resources in the country.
• (B) FEMA
  • The Foreign Exchange Management Act (FEMA) replaced FERA in 1999.
  • FEMA aimed to facilitate external trade and payments, and promote the orderly development and maintenance of the foreign exchange market in India.
• (A) Competition Act
  • The Competition Act was enacted in 2002 and came into full force in 2009.
  • The Act aimed to eliminate practices that adversely affect competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade in Indian markets.

Additional Information

• MRTP Act
  • It was one of the earliest attempts to regulate monopolistic and restrictive trade practices in India.
  • It was repealed with the introduction of the Competition Act, 2002.
• FERA
  • FERA was stringent and emphasized strict control over foreign exchange.
  • It was eventually replaced by FEMA as a part of economic liberalization and to make foreign exchange regulations more in tune with the post-liberalization era.
• FEMA
  • FEMA was introduced to facilitate external trade and payments, and for promoting the orderly development and maintenance of the foreign exchange market in India.
  • Unlike FERA, FEMA is more management-oriented and emphasizes on facilitating foreign exchange transactions.
• Competition Act
  • The Act established the Competition Commission of India (CCI) to prevent activities that have an adverse effect on competition in India.
  • It repealed and replaced the MRTP Act.

The correct answer is - (B), (D), (C), (A)

Key Points

• Thermal Power (B)
  • Thermal power is the largest source of electricity generation in India.
  • It includes power generated from coal, gas, and oil.
  • Coal-based thermal power plants contribute the major share within thermal power.
• Hydro Power (D)
  • Hydropower is the second-largest source of electricity in India.
  • It involves generating power through the use of water flowing from higher to lower points.
  • India has significant hydroelectric power plants due to its geographical diversity.
• New and Renewable Energy (C)
  • Renewable energy sources include solar, wind, biomass, and small hydro projects.
  • The government of India has been actively promoting the adoption of renewable energy.
  • It is the third-largest source of electricity generation after thermal and hydro.
• Nuclear Power (A)
  • Nuclear power contributes the least among the listed sources.
  • India has a few operational nuclear power plants contributing to the national grid.
  • It is considered a clean and efficient source of energy but has higher setup costs and long development times.

Additional Information

• India's Energy Mix
  • India's energy mix is diverse, ensuring energy security and addressing environmental concerns.
  • The government has set ambitious targets for increasing the share of renewable energy in the power generation mix.
  • Investments and policies are increasingly focused on sustainable and clean energy sources.
• Future of Power Generation in India
  • India is focusing on reducing its carbon footprint by enhancing renewable energy capacity.
  • Technological advancements in energy storage and smart grids are expected to play a significant role.
  • Public and private sector collaboration is crucial for achieving energy targets.

The correct answer is - Increase in the vulnerability of the workforce.

Key Points

• Increase in the vulnerability of the workforce
  • Casualization of the workforce refers to the shift from permanent, secure jobs to more temporary or casual employment.
  • This results in workers having less job security, fewer benefits, and often lower wages.
  • Casual workers are typically more susceptible to economic fluctuations and employer discretion, making their employment more precarious.
  • Such conditions increase the overall vulnerability of the workforce as they lack the stability and protections that regular workers receive.

Additional Information

• Decrease in the vulnerability of the workforce
  • Casualization typically does not provide the stability and benefits that reduce vulnerability; hence, this statement is incorrect.
• Increase in the number of regular workers
  • Casualization means more temporary or part-time positions rather than regular, full-time employment.
  • Therefore, it does not lead to an increase in the number of regular workers but rather to an increase in non-regular workers.
• Income and employment stability
  • Casual jobs are inherently less stable, with fluctuating hours and income, and fewer long-term guarantees.
  • This is contrary to the stability implied by regular, full-time employment.

The correct answer is Hyderabad.

Key Points

• The head office of the Insurance Regulatory and Development Authority of India (IRDAI) is situated in Hyderabad. 
• Insurance Regulatory and Development Authority of India (IRDAI):
  • It was constituted by the recommendations of the Malhotra Committee report, in 1999.
  • It is an autonomous body.
  • It regulates and develops the insurance industry.
  • The IRDA was incorporated as a statutory body in April 2000.
  • Objective: Enhance customer satisfaction through increased consumer choice and lower premiums while ensuring the financial security of the insurance market.
  • Today there are 34 general insurance companies and 24 life insurance companies operating in the country.

Additional Information

The correct answer is agricultural rural hinterland.

Key Points

• Industrially developed urban centers are usually surrounded by an "agricultural rural hinterland."
• In geographical terms, a 'hinterland' refers to the area surrounding a town or port, which is served by the port or town for the transportation of goods.
• In context, an agricultural rural hinterland serves as the region that supplies the urban center with agricultural products or raw materials and in return, it receives industrial goods and services.
• However, it's important to note that the exact nature and characteristics of the hinterland can change based on specific geographical or economic contexts.
• For instance, a seaport city might indeed have a "seaport hinterland" where the surrounding areas rely on the port for trade and transportation access.

Macroeconomics is also called the theory of income.

Key Points

•  Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole.
• It focuses on the aggregate changes in the economy such as unemployment, growth rate, gross domestic product, and inflation.  
• Macroeconomics is also known as the Theory of Income and Employment, or income analysis, as it focuses on how income and employment levels are determined in an economy. The subject of macroeconomics revolves around the determination of income and employment.
• Income and employment theory, a body of economic analysis concerned with the relative levels of output, employment, and prices in an economy. By defining the interrelation of these macroeconomic factors, governments try to create policies that contribute to economic stability.

The correct answer is The rate of inflation would increase.

Important Points 

• When the actual unemployment rate is less than the natural rate, inflation increases.
• When the actual unemployment rate exceeds its natural rate, inflation decreases.
• So, the natural rate of unemployment can be seen as the rate of unemployment required to keep inflation constant.

Key Points 

• The natural rate of unemployment:
  • The natural rate of unemployment is the unemployment rate that would exist in a growing and healthy economy.
  • In other words, the natural rate of unemployment includes only frictional and structural unemployment and not cyclical unemployment.
  • The natural rate of unemployment is related to two other important concepts: full employment and potential real GDP.
  • The economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate.
  • When the economy is at full employment, real GDP is equal to potential real GDP.
  • When the economy is below full employment, the unemployment rate is greater than the natural unemployment rate and real GDP is less than potential.
  • When the economy is above full employment, then the unemployment rate is less than the natural unemployment rate and real GDP is greater than potential.

Additional Information

• Inflation:
  • Inflation is the rate of increase in prices over a given period of time.
  • Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
  • But it can also be more narrowly calculated—for certain goods, such as food, or for services, such as a haircut, for example.
• Deflation:
  • Deflation is a serious economic issue that can exacerbate a crisis and turn a recession into a full-blown depression.
  • When prices fall and are expected to drop in the future, businesses and individuals choose to hold on to money rather than spend or invest.
  • This leads to a drop in demand, which in turn forces businesses to cut production and sell off inventories at even lower prices.
  • In order to correct the situation of deflation Securities are purchased by the central bank.
• Stagflation:
  • Stagflation refers to an economic condition where economic growth is very slow or stagnant and prices are rising. 
  • The term stagflation was coined by British politician Iain Macleod, who used the phrase in his speech to parliament in 1965.
• Hyperinflation:
  • Hyperinflation is a situation where the price increases are too sharp. 
  • Hyperinflation often occurs when there is a large increase in the money supply, which is not supported by growth in Gross Domestic Product (GDP). 
  • Such a situation results in an imbalance in the supply and demand for money. 

The correct answer is agglomeration economies.Key Points

• Agglomeration economies refer to the benefits that arise from the clustering of industries in urban centers. These benefits include:
  • Economies of scale: Firms can share infrastructure and resources, reducing costs and increasing efficiency.
  • Access to skilled labor: A concentration of industries in one area can attract a skilled workforce, making it easier for firms to find and hire qualified employees. 
  • Innovation: Proximity to other firms can lead to knowledge spillovers and collaboration, fostering innovation and growth.
  • Reduced transportation costs: By locating near other firms and suppliers, firms can reduce transportation costs and increase speed of delivery.

Additional Information

• Rural economies refer to economies that are based on agriculture and natural resources.
• Amalgamation economies refer to the benefits that arise from the consolidation of firms in a particular industry.
• Urban economies refer to the overall economic activity and growth of urban areas.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a flagship Programme of the Government of India.

Important Points MGNREGA:

• The scheme was introduced as a social measure that guarantees “the right to work”.

The correct answer is Reserve bank of India.

Key PointsReserve Bank of India (RBI) is India’s central bank.

• In compliance with the terms of the Reserve Bank of India Act, 1934, it was founded on April 1, 1935 in Calcutta.
  • It was permanently moved to Mumbai in 1937.
• Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
• It also functions as the "lender of last resort" and is considered Banker to Banks.
• It regulates the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.
• It also monitors the monetary policies through its Monetary Policy Committee (MPC).

Additional InformationState Bank of India:

• The Imperial Bank of India was nationalized to establish the State Bank of India on July 1, 1955.
• It is the biggest public-sector bank in India.
• Its first chairman was John Mathai.
• Its present chairman is Dinesh Kumar Khara.
• It administers public debt, acts as the government's bank, and collects money and makes payments on the government's behalf.
• It lends money to commercial banks and takes deposits from them.
• It acts as a representative for cooperative banks.

​Nationalised Bank:

• These are also known as Public Sector Bank.
• Banks are classified as public sector, where the public interest is the primary goal and the government has retained a majority of its share.
• In order to enter the banking industry after gaining independence, the Indian government began nationalising the Imperial Bank of India in 1955.
• It was renamed the State Bank of India after the Reserve Bank of India acquired 60% of the company.
• The Indian government nationalized fourteen more banks in 1969.

​Union Bank of India:

• It was founded in 1919.
• The Government of India nationalized it in 1969.
• It is the fifth-largest public-sector bank.
• Mahatma Gandhi officially opened it as a limited corporation.
• The present MD and CEO of Union Bank of India is A. Manimekhalai.

• All the public sector establishments and those private sector establishments which employ 10 hired workers or more are called formal sector establishments and those who work in such establishments are formal sector workers.
• All other enterprises and workers working in those enterprises form the informal sector. Thus, the informal sector includes millions of farmers, agricultural labourers, owners of small enterprises and people working in those enterprises as also the self-employed who do not have any hired workers.
• It also includes all non-farm casual wage labourers who work for more than one employer such as construction workers and headload workers. 
• The government, through its labour laws, enable workers to protect their rights in various ways. This section of the workforce forms trade unions, bargains with employers for better wages and other social security measures.
• Workers in formal and informal sectors, which are also referred to as organised and unorganised sectors.

The correct answer is Δs/Δy.

Key Points

The marginal propensity to save

• The marginal propensity to save (MPS) refers to the proportion of an aggregate raise in income that a consumer saves rather than spends on the consumption of goods and services.
• Put differently, the marginal propensity to save is the proportion of each added money of income that is saved rather than spent.
• MPS is a component of Keynesian macroeconomic theory and is calculated as the change in savings divided by the change in income, or as the complement of the marginal propensity to consume (MPC).
• Marginal propensity to save is the proportion of an increase in income that gets saved instead of spent on consumption.
• MPS varies by income level. MPS is typically higher at higher incomes.
• MPS helps determine the Keynesian multiplier, which describes the effect of increased investment or government spending as an economic stimulus.

Formula: MPS= dS/dY                         

• where: MPS = marginal propensity to save
• dS = change in savings
• dY = change in income  

The correct answer is On income of Rs 32 per day

Key Points

• The poverty line for rural India is based on the income level of individuals.
• However, the specific amount varies depending on factors such as the cost of living, inflation, and other socioeconomic indicators.
• As of 2021, the poverty line for rural areas in India is estimated at an income of Rs. 32 per day per person.
• This figure is based on the Tendulkar Committee's recommendations and is used by the government to identify households that are eligible for various poverty alleviation programs.

Additional Information

• It is important to note that the poverty line is a controversial issue in India, with many critics arguing that the current figure is too low and does not accurately reflect the true extent of poverty in the country.
• Some experts have suggested that a more realistic poverty line would be closer to Rs. 55 per day per person, while others have advocated for alternative measures of poverty that take into account factors such as access to healthcare, education, and basic amenities.