MPPSC 2013 — Economy Questions with Answers
All 19 Economy previous-year questions from MPPSC 2013, each with the correct answer and a full explanation. Practise them as a free, timed mock test with instant scoring.
Practice Economy as a timed test →- Q1.Agro-based Industry
With reference to the usefulness of the by-products of the sugar industry, which of the following statements is/are correct?
- a)1 only
- b)2 and 3 only
- c)1 and 3 only
- d)1, 2 and 3
Explanation: Bagasse is used as fuel and molasses to make ethanol, but molasses is not a feedstock for synthetic chemical fertilizers, so only 1 and 3 are correct.
- Q2.External Sector — BoP
The balance of payments of a country is a systematic record of
- a)All import-export transactions of a country during a given period, usually one year.
- b)Goods exported by a country in a year.
- c)Economic transactions between the government of one country and the government of another country.
- d)Movement of capital from one country to another.
Explanation: The balance of payments is a systematic record of all of a country's economic transactions, including imports and exports, over a period—usually a year.
- Q3.Banking — RBI
The Reserve Bank of India regulates the commercial banks in matters of — Select the correct answer using the codes given below.
- a)1 and 4 only
- b)2, 3 and 4 only
- c)1, 2 and 3 only
- d)1, 2, 3 and 4
Explanation: The RBI regulates commercial banks on liquidity, branch expansion, mergers and winding-up, so all four apply.
- Q4.Monetary Policy
An increase in the Bank Rate generally indicates that the
- a)the market rate of interest is likely to fall
- b)the central bank is no longer lending to commercial banks
- c)the central bank is following a cheap money policy
- d)the central bank is following a dear money policy
Explanation: A rise in the Bank Rate signals a contractionary (tight) monetary policy aimed at curbing credit.
- Q5.Public Finance — Deficit Financing
In India, deficit financing is used for raising resources for
- a)For economic development
- b)For repaying public debt
- c)For adjusting balance of payments
- d)For reducing foreign debt
Explanation: Deficit financing in India is primarily used to raise resources for economic development.
- Q6.External Sector — Capital Account
Which of the following constitute the Capital Account? Select the correct answer using the codes given below.
- a)1, 2 and 3
- b)1, 2 and 4
- c)2, 3 and 4
- d)1, 3 and 4
Explanation: The capital account includes foreign loans, FDI and portfolio investment; private remittances are current-account items.
- Q7.Inflation
Consider the following statements about inflation. Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Explanation: Inflation erodes the real value of money, benefiting borrowers (debtors) while hurting bondholders, so only statement 1 is correct.
- Q8.Unemployment
Disguised unemployment generally means
- a)a large number of people remain unemployed
- b)alternative employment is not available
- c)the marginal productivity of labor is zero
- d)the productivity of workers is low
Explanation: Disguised unemployment exists when extra workers add nothing to output, i.e., their marginal productivity is zero.
- Q9.Money — Liquidity
Consider the following liquid assets. What is the correct sequence of these assets in the decreasing order of liquidity?
- a)1 - 4 - 3 - 2
- b)4 - 3 - 2 - 1
- c)2 - 3 - 1 - 4
- d)4 - 1 - 3 - 2
Explanation: In decreasing liquidity the order is currency, demand deposits, savings deposits, then time deposits (4-1-3-2).
- Q10.Monetary Policy — OMO
In the context of the Indian economy, 'Open Market Operations' refers to
- a)Scheduled banks taking loans from RBI
- b)Commercial banks lending to industry and trade sectors
- c)Purchase and sale of government securities by RBI
- d)None of the above
Explanation: Open Market Operations are the RBI's purchase and sale of government securities to manage money supply.
- Q11.Banking — Priority Sector Lending
Priority Sector Lending by banks in India constitutes the lending to
- a)Agriculture
- b)Micro and small enterprises
- c)Weaker sections
- d)All of the above
Explanation: Priority sector lending covers agriculture, micro and small enterprises and weaker sections, so all of the above qualify.
- Q12.Demographic Dividend
To obtain full benefits of demographic dividend, what should India do?
- a)Promotion of skill development
- b)Initiation of more social security schemes
- c)Reduction in infant mortality rate
- d)Privatization of higher education
Explanation: To reap the demographic dividend, India must invest in skill development of its young workforce.
- Q13.Inflation — Causes
A rise in the general level of prices may be caused by — Select the correct answer using the codes given below.
- a)1 only
- b)1 and 2 only
- c)2 and 3 only
- d)1, 2 and 3
Explanation: A general price rise can stem from greater money supply, lower output or higher effective demand, so all three causes apply.
- Q14.External Sector — Forex Reserves
Which one of the following groups of items is included in India's foreign-exchange reserves?
- a)Foreign currency assets, Special Drawing Rights (SDR) and loans from abroad
- b)Foreign currency assets, gold held by the Reserve Bank of India and Special Drawing Rights (SDR)
- c)Foreign currency assets, loans from the World Bank and Special Drawing Rights (SDR)
- d)Foreign currency assets, gold held by the Reserve Bank of India and loans from the World Bank
Explanation: India's forex reserves comprise foreign-currency assets, the RBI's gold holdings and SDRs.
- Q15.Public Finance — Deficit Financing
Which one of the following is likely to be the most inflationary in its effect?
- a)Repayment of public debt
- b)Financing of budget deficit by borrowing from the public
- c)Financing of budget deficit by borrowing from banks
- d)Financing of budget deficit by creation of new money
Explanation: Creating new money to finance a deficit is the most inflationary option as it directly expands the money supply.
- Q16.Money — Demand & Interest
Supply of money remaining the same, when there is an increase in demand for money, there will be
- a)The price level will fall
- b)The interest rate will increase
- c)The interest rate will decrease
- d)Income and employment levels will increase
Explanation: With money supply fixed, a rise in money demand pushes up the rate of interest.
- Q17.Economic Growth
Economic growth in country X will necessarily have to occur if
- a)there is technological progress in the world economy
- b)population growth occurs in X
- c)capital formation occurs in X
- d)the volume of trade in the world economy increases
Explanation: Sustained economic growth in a country necessarily requires capital formation within that country.
- Q18.National Income Accounting
The national income of a country in a given period is equal to the
- a)equal to the total value of goods and services produced by citizens.
- b)equal to the sum of total consumption and investment expenditure.
- c)equal to the sum of personal incomes of all individuals.
- d)equal to the monetary value of final goods and services produced.
Explanation: National income equals the monetary value of all final goods and services produced in the economy over a period.
- Q19.Rural Credit Institutions
Which of the following grants direct credit assistance to households? Select the correct answer using the codes given below.
- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)1, 2 and 3
Explanation: Regional Rural Banks and Land Development Banks give direct credit to households, whereas NABARD is a refinancing apex institution.
MPPSC 2013 — other subjects
Economy — other years
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