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Economy Practice Set 01

Authored practice, not a verbatim PYQ. 25 CAPF-level economy MCQs with answer key and one-line explanations, full-syllabus span across national income, money, banking and fiscal basics.

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PaperPaper ISubjectEconomy

Authored practice, not a verbatim PYQ. Twenty-five single-correct MCQs in CAPF Paper I objective style, spanning national income, money, banking, taxation and fiscal basics. Attempt closed-book, then check the key. For year-sensitive figures (rates, targets), verify the latest.

Questions

Q1Gross Domestic Product (GDP) measures the value of goods and services produced:
  1. ABy a country's citizens anywhere in the world
  2. BWithin the geographical boundaries of a country
  3. COnly in the public sector
  4. DOnly in agriculture
Q2The difference between GDP and GNP is the:
  1. ANet factor income from abroad
  2. BDepreciation
  3. CIndirect taxes
  4. DSubsidies
Q3Which institution is the central bank of India?
  1. AState Bank of India
  2. BReserve Bank of India
  3. CNABARD
  4. DSEBI
Q4The repo rate is the rate at which the RBI:
  1. ABorrows from commercial banks
  2. BLends short-term funds to commercial banks against securities
  3. CLends to the central government
  4. DPays interest on deposits
Q5Which body decides the policy repo rate in India?
  1. AThe Union Cabinet
  2. BThe Monetary Policy Committee
  3. CThe Finance Commission
  4. DSEBI
Q6The Cash Reserve Ratio (CRR) is:
  1. AThe share of deposits banks must keep with the RBI
  2. BThe interest rate on loans
  3. CA direct tax
  4. DA subsidy to farmers
Q7The flexible inflation-targeting framework in India targets CPI inflation at:
  1. A2 percent
  2. B4 percent within a band of plus or minus 2 percent
  3. C6 percent fixed
  4. DZero percent
Q8The Union Budget is presented under which Article of the Constitution as the Annual Financial Statement?
  1. AArticle 110
  2. BArticle 112
  3. CArticle 280
  4. DArticle 360
Q9Fiscal deficit is defined as:
  1. ATotal expenditure minus total receipts excluding borrowings
  2. BRevenue expenditure minus revenue receipts
  3. CTotal expenditure minus interest payments
  4. DImports minus exports
Q10The financial year (fiscal year) in India runs from:
  1. A1 January to 31 December
  2. B1 April to 31 March
  3. C1 July to 30 June
  4. D1 October to 30 September
Q11The Goods and Services Tax was introduced through which Constitutional Amendment?
  1. A100th
  2. B101st
  3. C102nd
  4. D103rd
Q12Which of the following is a direct tax?
  1. AGST
  2. BIncome tax
  3. CCustoms duty
  4. DExcise duty
Q13The apex body that recommends sharing of taxes between the Centre and states is the:
  1. ANITI Aayog
  2. BFinance Commission
  3. CPlanning Commission
  4. DGST Council
Q14The Finance Commission is constituted under which Article and how often?
  1. AArticle 280, normally every five years
  2. BArticle 360, every year
  3. CArticle 112, every ten years
  4. DArticle 324, every six years
Q15Which one of the following measures money supply as currency with the public plus demand deposits?
  1. AM0
  2. BM1
  3. CM3
  4. DM4
Q16Demand-pull inflation is caused chiefly by:
  1. AA fall in demand
  2. BExcess aggregate demand over available supply
  3. CRising input costs only
  4. DA balanced budget
Q17The Statutory Liquidity Ratio (SLR) is maintained by banks in the form of:
  1. ACash with the RBI only
  2. BLiquid assets such as gold and approved securities
  3. CForeign currency only
  4. DLoans to farmers
Q18Which of the following is a qualitative (selective) instrument of monetary policy?
  1. ACash Reserve Ratio
  2. BOpen market operations
  3. CMargin requirements and moral suasion
  4. DRepo rate
Q19A budget where total expenditure exceeds total revenue is called a:
  1. ASurplus budget
  2. BBalanced budget
  3. CDeficit budget
  4. DZero-based budget
Q20The Consumer Price Index (CPI) primarily measures:
  1. AWholesale price changes
  2. BRetail price changes faced by consumers
  3. CStock market movement
  4. DExport prices
Q21The term "fiscal policy" relates to government decisions on:
  1. AInterest rates and money supply
  2. BTaxation and public expenditure
  3. CExchange rates only
  4. DForeign trade tariffs only
Q22Disinvestment refers to:
  1. AInvesting more in public sector units
  2. BThe government selling part or all of its stake in public sector units
  3. CA type of foreign aid
  4. DA bank loan
Q23Which tax is levied and collected by the Centre but assigned to the states?
  1. ACorporation tax
  2. BIncome tax
  3. CStamp duties on certain instruments
  4. DGST on imports
Q24The Laffer curve illustrates the relationship between:
  1. AInflation and unemployment
  2. BTax rates and tax revenue
  3. CSaving and investment
  4. DImports and exports
Q25When the RBI raises the repo rate, the usual intended effect is to:
  1. AIncrease borrowing and spending
  2. BCool inflation by making credit costlier
  3. CBoost exports directly
  4. DReduce the fiscal deficit automatically

Answer key

Reveal the answer key and full worked solutions
Q Answer Why
1 (b) GDP counts output within national borders, regardless of producer nationality.
2 (a) GNP equals GDP plus net factor income from abroad.
3 (b) The Reserve Bank of India is the central bank.
4 (b) The repo rate is the RBI's short-term lending rate against securities.
5 (b) The six-member Monetary Policy Committee sets the repo rate.
6 (a) CRR is the proportion of deposits banks must park with the RBI.
7 (b) The target is 4 percent CPI inflation, with a 2 to 6 percent band.
8 (b) Article 112 mandates the Annual Financial Statement (Union Budget).
9 (a) Fiscal deficit is total expenditure minus receipts excluding borrowings.
10 (b) India's fiscal year runs 1 April to 31 March.
11 (b) GST came via the Constitution (101st Amendment) Act, 2016.
12 (b) Income tax is a direct tax; the others are indirect.
13 (b) The Finance Commission recommends Centre-state tax devolution.
14 (a) The Finance Commission is set up under Article 280, usually every five years.
15 (b) M1 equals currency with the public plus demand deposits (narrow money).
16 (b) Demand-pull inflation arises when demand outstrips supply.
17 (b) SLR is held as liquid assets like gold and approved securities.
18 (c) Margin requirements and moral suasion are qualitative tools.
19 (c) Expenditure above revenue is a deficit budget.
20 (b) CPI tracks retail prices faced by consumers.
21 (b) Fiscal policy concerns taxation and government spending.
22 (b) Disinvestment is the sale of government stake in public sector units.
23 (c) Certain stamp duties are levied by the Centre but assigned to the states.
24 (b) The Laffer curve links tax rates to total tax revenue.
25 (b) A higher repo rate raises borrowing costs, curbing demand and inflation.

Cross-references

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