# CHAPTER WISE ECONOMY MCQ’S WITH EXPLANATIONS

## Economic Affairs

These are most-important and most-expected Questions for IAS Prelims General Studies paper-1 (ECONOMY) of UPSC Civil Service exam. Every day Himalai is coming with different subjects questions and answers with explanation analysis, these Questions will be both theoretical and fact based. Every day preparation will make a way for success, keep up your daily IAS Exam preparation with Himalai subject wise, chapter wise and topic wise Mcq’s with answers and analysis. We are providing our daily program list so thataspirant can note it and keep a watch on Himalai Mock test blogs for updated questions and get prepare for the Exam.

#### EveryDay Program List

Sunday- Indian and world Geography

Monday-General issues on Environmental Ecology, bio-diversity and Climate Change

Tuesday- General Science

Wednesday- Indian Polity and Governance

Thursday- History of India and Indian National Movement

Friday- Economic and Social Development

Saturday-Current Affairs Concepts

#### Q1. The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called:

a) CRR (Cash Reserve Ratio)            b) SLR (Statutory liquid ratio)

c) Repo rate                                        d) SDR

Ans:     B

Explanation:    The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called SLR. It is approximately 25% SLR is fixed by RBI through its Monetary policy

REPO RATE- it is a rate at which RBI gives loan to commercial Banks

#### Reason (R) : Price of the country products in the International market may fall due to devaluation.

a) Both A and R true but R is the correct Explanation of A.

b) A is false but R is True

c) A is true but R is False

d) A and R both are true but R is the not correct explanation of A

Ans:     A

Explanation:    Devaluation of a money promote export, because it reduces the price of the domestic product in the international market,, but it will be successful if there is elastic demand for the domestic product in the international market.

#### Q3. The Indian Rupee is fully convertible:

1. In respect of current account of Balance of Payment.
2. In respect of capital account balance of payment

Which of the statements are correct?

a) 1 Alone            b) 1 and 2           c) None of these          d) Only 2

Ans:     A

Explanation:    Indian Rupee is fully convertible in respect of current account of the balance of payment. Tarapor Committee has given the recommendation for full convertibility of rupee

#### Q4. Match List I with the List II and select the correct answer:

LIST I                                       LIST II

a) Boom                       1.Grandual fall of income, output and employment with business activity in a low gear

b) Recovery                 2. Steady rise in the prices, income, output and employment

c) Depression              3.Business activity at high level with increasing income, output and employment at macro level.

d) Recession               4.Unprecedented level of under employment, drastic fall in the output and employment

Codes: A         B          C          D

a)        3           2          4          1

b)        1           2          3          4

c)        2           1          4          1

d)       1            4          3          2

Ans:     A

Explanation:    Boom:  Business activities are at higher level and income, employment and output are at higher level.

Recession : Grandual fall of income and output

Depression : Drastic fall in the output, income

Recovery : Steady rise in the general prices, output

#### Q5. In India Interest rate on saving accounts in all the nationalized commercial banks is fixed by:

a) Ministry of finance              b) State Finance Commission

c) State bank Of India            d) Reserve bank of India

Ans:     D

Explanation:    Interest rate on saving bank amount is fixed by the RBI. It also formulates monetary policy of India. It is a regulator and promoter of Indian financial system.

It lends money to commercial bank. Its main office is situated in Mumbai. It is the banker of central and state government.

#### Q6. Who maintains the foreign exchange reserve in India

a) Reserve Bank of India                                     b) State bank of India

c) Ministry of finance, government of India          d) Export Import Bank of India

Ans:     A

Explanation:    RBI maintains the foreign exchange reserve in India. It established in 1935 and nationalized in 1949. It is the central bank of the country. It is the Banker of the central and the state government. It gives loans to commercial bank. It formulates the monetary policy with regard to the Indian rupee. It is regulator and supervisor of the financial system of the country.

#### Q7. In the context of Indian economy, consider the following pairs:

Term Description                                 Most Appropriate

Melt down                                           Fall in stock prices

Slow Down                                           Fall in growth rate

Recession                                           Fall in GDP, Negative growth

Which of the pair is correctly matched?

1. a) 1only              b) 1 and 3                 c) 1 and 2        d) None of the se

Ans:     B

Explanation:    Recession means negative growth and fall in GDP

Slow down Means reduction in the growth rate of GDP

Melt down is the term used for weakness in financial markets.

#### Q8. Consider the following statements:

1. Corporation tax
2. Excise Tax
3. Income tax
4. Wealth Tax

Which of these are direct taxes?

a) 1 & 4                   b) 1 & 3                       c) 1, 2 &3        d) All of the above

Ans:     B

Explanation:    Wealth tax and Excise tax are the indirect taxes while corporation tax, Income tax, Gift tax are direct taxes.

#### Q9. Consider the following Pairs:

Firm                                                 Group

Ashok Leyland                                   Hinduja

Hindalco Industries                            A. V. Birla

Suzlon Energy                                   Punj Lloyd

Total                                                   Germany

Which of the pairs are correctly matched?

a) 1 and 2                        b) 2 only                      c) 1, 2 and 4                  d) 1, 2, 3

Ans:     C

Explanation:

1.  Ashok Leyland Hinduja
2. Hindalco Industries A. V. Birla
3. Suzlon Energy Tulsi Tanti
4. Total Germany

#### Q10. MCA-21 is a major initiative taken up by the government of India in which one of the following areas?

a) FDI in India                                 b) Attracting international tourists

c) Modernization of airports           d) E-Government

Ans:     D

Explanation:    The National e-Governance plan was approved and 25projects in mission mode, launched in 2006-2007. Among them is project for setting up common services and assigning unique ID to BPL families.

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