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Economy Practice Set 02

Authored practice, not a verbatim PYQ. 25 CAPF-level economy MCQs with answer key and one-line explanations, full-syllabus span across banking, capital markets and the external sector.

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At a glance
PaperPaper ISubjectEconomy

Authored practice, not a verbatim PYQ. Twenty-five single-correct MCQs in CAPF Paper I objective style, spanning banking and financial reforms, capital markets, and the external sector. Attempt closed-book, then check the key. For year-sensitive figures, verify the latest.

Questions

Q1The regulator of the securities (capital) market in India is:
  1. ARBI
  2. BSEBI
  3. CIRDAI
  4. DPFRDA
Q2Which of the following is a money-market instrument?
  1. AEquity shares
  2. BTreasury Bills
  3. CDebentures of 10 years
  4. DFixed deposits of five years
Q3The Balance of Payments (BoP) consists of the:
  1. ACurrent account and capital account
  2. BRevenue account only
  3. CBudget deficit only
  4. DTrade account only
Q4A current account deficit arises when:
  1. AExports exceed imports
  2. BImports of goods and services exceed exports
  3. CThe budget is balanced
  4. DForeign reserves rise
Q5Foreign Direct Investment (FDI) is distinguished from portfolio investment by:
  1. ABeing short-term and speculative
  2. BInvolving a lasting interest and management control
  3. CBeing limited to government bonds
  4. DBeing made only in real estate
Q6Devaluation of a currency means:
  1. AAn official lowering of the currency's value under a fixed exchange-rate regime
  2. BA rise in the currency's value
  3. CPrinting more notes
  4. DBanning imports
Q7Which one of the following is NOT a function of the RBI?
  1. AIssuing currency notes
  2. BActing as banker to the government
  3. CRegulating the stock market
  4. DManaging foreign exchange reserves
Q8The "lender of last resort" function is performed by the:
  1. ACommercial banks
  2. BReserve Bank of India
  3. CSEBI
  4. DWorld Bank
Q9Priority Sector Lending norms require banks to lend to:
  1. ALarge corporates only
  2. BSectors such as agriculture, MSMEs and weaker sections
  3. CForeign companies
  4. DOnly urban housing
Q10Non-Performing Assets (NPAs) are loans where:
  1. AInterest and principal are paid on time
  2. BRepayment is overdue (typically beyond 90 days)
  3. CThe loan is fully insured
  4. DThe borrower is a public sector unit
Q11The Insolvency and Bankruptcy Code was enacted in which year?
  1. A2014
  2. B2016
  3. C2018
  4. D2020
Q12Which one of the following is a development financial institution for agriculture and rural development?
  1. ASIDBI
  2. BNABARD
  3. CEXIM Bank
  4. DSEBI
Q13The "Sensex" is the benchmark index of which stock exchange?
  1. ANational Stock Exchange
  2. BBombay Stock Exchange
  3. CCalcutta Stock Exchange
  4. DMulti Commodity Exchange
Q14The "Nifty 50" is associated with which exchange?
  1. ABombay Stock Exchange
  2. BNational Stock Exchange
  3. CLondon Stock Exchange
  4. DNASDAQ
Q15Hard currency refers to a currency that is:
  1. AWidely accepted and easily convertible internationally
  2. BPrinted on hard paper
  3. CUsed only domestically
  4. DBacked only by gold
Q16An Initial Public Offering (IPO) is:
  1. AA company offering its shares to the public for the first time
  2. BA bank loan
  3. CA government bond auction
  4. DA foreign aid programme
Q17The exchange rate system India follows is best described as:
  1. AFixed exchange rate
  2. BManaged float (market-determined with RBI intervention)
  3. CGold standard
  4. DCurrency board
Q18Special Drawing Rights (SDRs) are issued by the:
  1. AWorld Bank
  2. BInternational Monetary Fund
  3. CAsian Development Bank
  4. DWTO
Q19The "twin balance sheet problem" in India refers to stress in:
  1. AHouseholds and government
  2. BCorporate and banking balance sheets
  3. CImports and exports
  4. DStates and Centre
Q20Bank deposit insurance in India up to a specified limit is provided by:
  1. ASEBI
  2. BDICGC (a RBI subsidiary)
  3. CLIC
  4. DNITI Aayog
Q21A "blue chip" stock refers to shares of:
  1. ASmall start-ups
  2. BLarge, financially sound and well-established companies
  3. CLoss-making firms
  4. DGovernment bonds
Q22Convertibility of the rupee on the current account means:
  1. AFree conversion for trade and current transactions
  2. BFree conversion for all capital flows
  3. CNo conversion allowed
  4. DOnly government can convert
Q23The premium institution that regulates insurance in India is:
  1. ASEBI
  2. BIRDAI
  3. CPFRDA
  4. DRBI
Q24"Repatriation" of investment means:
  1. ASending profits or capital back to the home country
  2. BReinvesting locally
  3. CDefaulting on a loan
  4. DImporting goods
Q25Foreign exchange reserves of India are held and managed by the:
  1. AFinance Ministry alone
  2. BReserve Bank of India
  3. CSEBI
  4. DCommercial banks

Answer key

Reveal the answer key and full worked solutions
Q Answer Why
1 (b) SEBI regulates the securities market.
2 (b) Treasury Bills are short-term money-market instruments.
3 (a) BoP comprises the current account and the capital account.
4 (b) A current account deficit means imports of goods/services exceed exports.
5 (b) FDI involves lasting interest and management control.
6 (a) Devaluation is the official lowering of value under a fixed-rate regime.
7 (c) The RBI does not regulate the stock market; SEBI does.
8 (b) The RBI is the lender of last resort.
9 (b) Priority sector lending covers agriculture, MSMEs and weaker sections.
10 (b) NPAs are loans overdue beyond about 90 days.
11 (b) The Insolvency and Bankruptcy Code was enacted in 2016.
12 (b) NABARD is the apex rural and agricultural development bank.
13 (b) The Sensex is the benchmark index of the Bombay Stock Exchange.
14 (b) The Nifty 50 is the National Stock Exchange's flagship index.
15 (a) Hard currency is widely accepted and easily convertible.
16 (a) An IPO is a company's first public sale of shares.
17 (b) India uses a managed float with periodic RBI intervention.
18 (b) SDRs are issued by the IMF.
19 (b) The twin balance sheet problem involves stressed corporate and bank books.
20 (b) DICGC, an RBI subsidiary, insures bank deposits up to a limit.
21 (b) Blue chips are large, sound, established companies.
22 (a) Current account convertibility allows free conversion for trade transactions.
23 (b) IRDAI regulates insurance.
24 (a) Repatriation is returning profits or capital to the home country.
25 (b) The RBI holds and manages India's forex reserves.

Cross-references

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