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

Key Points

• The notion of a utility function comes from the field of economics and decision theory. It provides a way to quantify an individual's preference for goods or outcomes.
• The greater the utility, the greater the preference. This function u(x) translates various allocations into measurable units of satisfaction.
• Now, one important aspect to understand is that utility values themselves are not of primary interest.
• What really matters are the rankings or orderings that those values represent.
  • For instance, we should care that u(Apples) > u(Oranges), meaning an individual prefers Apples to Oranges, rather than focusing on the specific utility values like u(Apples) = 10 and u(Oranges) = 5.
  • Because of this focus on maintaining the correct relative order of preferences, the excerpt mentions that utility functions can be scaled in any way that preserves this underlying preference ordering.
• This means the specific numerical representation of utility can take many forms.
  • For instance, if we multiplied all utility values in the above example by 2, we'd have u(Apples) = 20 and u(Oranges) = 10.
  • The specific values have changed, but the individual still prefers Apples to Oranges, so the underlying preference order - and thus the utility function - remains valid.
• This connotes the relative nature of utility values.

The correct answer is An amalgamation of variations in fiscal provisions, consumer proclivities, and technological advancements.
Key Points 

• In the labyrinth of economic theory, it becomes crucial to recognize that migratory shifts affecting an exodus from the state of equilibrium - whether observed in demand or supply proclivities - a phenomenon is frequently the result of an intricate interplay between a variety of impactful elements that sculpt the marketplace's structure..
• Neither a sole transformative pivot in consumer inclinations or preferences, singular income fluctuations, nor even isolated iterations in technology, can comprehensively encompass the potential causes enabling such shifts. Instead, a much broader frame of reference is required.
• The fundamental economic concept identifies that alterations in demand or supply may result from a confluence of variations in disposable income levels, technology (reflected in improvements leading to enhanced production efficiency), and consumer preferences. These shifts can subsequently catapult the market from a state of equilibrium to a new balance point.
• Thus, the entity encapsulating this concoction of potential influences - namely, simultaneous variations in fiscal endowments, societal tastes, and techno-dynamics - the statement reflects the broadest and most expansive synthesis of possible influences at play in this economics context.

The correct answer is 145 Crore.

Key Points

• As per the Bihar Budget 67% of the total expenditure is allocated to different sectors by the Bihar state in 2022-23.
• The state has allocated 3.5% of its total expenditure towards agriculture and allied activities.  This is lower than the average allocation for agriculture by states (6.2%).
• Sector-wise expenditure under Bihar Budget 2022-23 (in Rs crore):-
  • Agriculture and allied activities
    • Rs 145 crore has been allocated towards organic farming. Hence option 2 is correct.
    • Rs 76 crore has been allocated towards Pradhan Mantri Krishi Sinchai Yojana.
  • Education, Sports, Arts, and Culture 
    • Allocation towards cash incentives to female students for completing senior secondary is Rs 400 crore.
    • Rs 300 crore has been allocated towards the mid-day meal scheme.
  • ​Rural Development
    • Rs 5,014 crore have been allocated towards PMGSY.
    • Rs 2,500 crore has been allocated towards MGNREGS. 
  • Health and Family Welfare 
    • Rs 3,156 crore has been allocated towards the provision of health services in urban areas. Rs 120 crore has been allocated towards incentives to ASHA workers.
  • Social Welfare and Nutrition 
    • Rs 810 crore has been allocated towards Mukhyamantri Vriddhhajan Pension Yojana.
  • Police 
    • District police and village police have been allocated Rs 6,130 crore and Rs 1,307 crore, respectively.
  • Energy
    • Rs 9,653 crore has been allocated towards assistance to the state power holding corporation.
  • Roads and Bridges 
    • Rs 3,821 has been allocated towards capital outlay on roads and bridges.
  • Urban Development 
    • Rs 524 crore has been allocated towards Housing for all–Awas yojana.

The correct answer is Britishers did not introduce modern technologies or irrigational equipment or fertilizers for agricultural practices.

• Agriculture's productivity and output were low as a result of British land settlements and government policy.

Key Points

• The zamindari system, in which the zamindars earned all the profits rather than farmers and cultivators, was a significant contributing factor back then. Back then, farmers were discouraged from increasing production, which undoubtedly resulted in poorer yields.
• Because they were reliant on monsoon rains, irrigation systems and canals were not built during British control.
• Agriculture's low level of output can be ascribed to outdated technology, a lack of irrigation systems, and insufficient fertilizer application.
• As a result, the agricultural sector of the Indian economy was quite fragile on the brink of Independence.

The correct answer is Option 4.

Key Points

• The exchange rate
  • The exchange rate of any currency is determined by the supply and demand for the country’s currency in the international foreign exchange market. Hence, Statement 1 is correct.
  • For example, the value of the Indian rupee concerning the dollar is determined by the demand of the dollar against the Indian rupee. If the demand for the dollar increases, its value increases, and the dollar appreciates while the Indian rupee depreciates concerning the dollar.
  • The price of one currency in terms of the other currency is called the exchange rate. E.g. $1 = ₹ 70. Meaning, it costs ₹ 70 to buy one dollar. Hence, Statement 2 is correct.
  • This is also called Nominal Exchange Rate because it does not take into consideration inflation or purchasing power in the respective countries.
  • Foreign Exchange Market is a place where currencies are exchanged is called. Their dealers are called Authorized (Forex) Dealers (AD). They can be banks or non-banks. They have to get registered with RBI under the Foreign Exchange Management Act (FEMA).
  • These dealers keep separate prices for buying and selling, to make a profit in between e.g. ICICI: 1 Dollar buying price ₹ 67.95 and $1 selling price is ₹ 72.76.
  • Such currency transaction service is also subjected to GST, however, the rate depends on the quantum of currency exchanged. (e.g. up to ₹ 10 lakh exchanged in foreign currency then only about ₹ 3000 of that 10 lakh will be taxable in GST → 18% of 3000 → ₹ 540 GST Tax.)
  • In floating or flexible exchange rate is determined by the market forces of demand and supply.
  • Under the floating exchange rate regime, the market forces determine the value of the domestic currency based on the forces of demand and supply of the domestic currency.
  • In this system, neither the government nor the central bank intervenes and the market functions freely to determine the real value of the domestic currency.
  • The floating exchange rate regime establishes trust among the foreign investors which can help in the increase in foreign investment in the domestic economy.
  • IMF would decide the Fixed Exchange rate for each country. Hence, Statement 4 is not correct.
  • Floating Exchange rate- Fixed exchange rate system has an inherent risk of a Payment crisis. Hence many countries started shifting to Floating Exchange Rate, first being the UK in 1973

Additional Information

• Mixed Exchange Rate
  • Where the central bank interferes whenever a crisis occurs. Otherwise, the exchange rate is market-driven on day to day basis
• Objectives Of Exchange Rate Management In India
  • To ensure that the economic fundamentals of the Indian economy are correctly reflected in the external value of the Indian rupee. Hence, Statement 3 is correct.
  • To reduce the volatility in exchange rates by ensuring that changes in the exchange rates take place in a smooth and orderly manner.
  • To maintain a sufficient level of foreign exchange reserves to deal with any external currency shocks.
  • To help in the elimination of market constraints for ensuring the growth of a healthy foreign exchange market.
  • To help in the prevention of the emergence of any destabilizing and speculative activities in the foreign exchange market.
  • The exchange rate system in India has undergone a systematic change since Independence. From the system of the pegged exchange rate to the present form of market-determined exchange rate after liberalisation in 1993.

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 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 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%.​

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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 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 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 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%.