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Mini-Test: Economy (Indian Economy)

Subject-wise 25-question CAPF Paper I economy mini-test with answer key and one-line explanations, authored practice not verbatim PYQs

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PaperPaper ISubjectEconomy
Test SeriesMini TestEconomyPaper 1Practice

Authored practice, not a verbatim PYQ. Twenty-five questions on the Indian economy, calibrated to the CAPF Paper I level: national income, money and banking, the budget, inflation, taxation and schemes. Where a number changes year to year (repo rate, GDP growth, the latest inflation print), the question is framed around the durable concept rather than a stale figure; always verify the latest official figure separately. Attempt closed-book in about 25 minutes. CAPF applies one-third negative marking.

Questions

Q1The central bank of India that regulates monetary policy is the:
  1. ASEBI
  2. BNABARD
  3. CReserve Bank of India
  4. DNITI Aayog
Q2The rate at which the RBI lends short-term funds to commercial banks against government securities is the:
  1. ABank rate
  2. BRepo rate
  3. CReverse repo rate
  4. DCash reserve ratio
Q3The body that decides the policy repo rate in India is the:
  1. AUnion Cabinet
  2. BMonetary Policy Committee
  3. CFinance Commission
  4. DSEBI
Q4Under the flexible inflation-targeting framework, the RBI targets consumer price index (CPI) inflation at:
  1. A2 percent, band plus or minus 1
  2. B4 percent, band plus or minus 2
  3. C6 percent, band plus or minus 2
  4. D5 percent, band plus or minus 1
Q5The Goods and Services Tax in India was introduced by which Constitutional Amendment?
  1. A100th
  2. B101st
  3. C102nd
  4. D103rd
Q6Which of the following is a direct tax?
  1. AGST
  2. BCustoms duty
  3. CIncome tax
  4. DExcise duty
Q7Match List I (Deficit) with List II (Definition):
  1. AFiscal deficit 1. Total expenditure minus total receipts excluding borrowings
  2. BRevenue deficit 2. Revenue expenditure minus revenue receipts
  3. CPrimary deficit 3. Fiscal deficit minus interest payments
  4. DGDP 4. Total value of goods and services produced within a country Codes:
  5. AA-1, B-2, C-3, D-4
  6. BA-2, B-1, C-3, D-4
  7. CA-1, B-3, C-2, D-4
  8. DA-4, B-2, C-3, D-1
Q8GDP at market prices minus depreciation gives:
  1. ANet Domestic Product (NDP)
  2. BGross National Product (GNP)
  3. CNational income
  4. DPer capita income
Q9The Cash Reserve Ratio (CRR) is the portion of deposits that banks must keep:
  1. AIn government bonds
  2. BAs cash reserves with the RBI
  3. CIn foreign currency
  4. DAs loans to priority sectors
Q10Which institution replaced the Planning Commission in 2015?
  1. AFinance Commission
  2. BNITI Aayog
  3. CNABARD
  4. DSEBI
Q11The first Five Year Plan in India, launched in 1951, gave priority to:
  1. AHeavy industry
  2. BAgriculture and irrigation
  3. CServices and IT
  4. DDefence production
Q12The regulator of the securities market in India is:
  1. ARBI
  2. BSEBI
  3. CIRDAI
  4. DPFRDA
Q13A sustained rise in the general price level of goods and services is called:
  1. ADeflation
  2. BDisinflation
  3. CInflation
  4. DStagflation
Q14When inflation is high and the economy is also stagnant with high unemployment, the situation is called:
  1. ARecession
  2. BStagflation
  3. CDeflation
  4. DDepression
Q15The Balance of Payments current account includes:
  1. AForeign direct investment only
  2. BTrade in goods and services and transfers
  3. CLoans and external borrowings only
  4. DChanges in foreign exchange reserves only
Q16The Mahatma Gandhi National Rural Employment Guarantee Act guarantees how many days of wage employment per rural household per year?
  1. A50 days
  2. B100 days
  3. C150 days
  4. D200 days
Q17The financial year in India runs from:
  1. AJanuary to December
  2. BApril to March
  3. CJuly to June
  4. DOctober to September
Q18Which of these is a measure of money supply that includes currency with the public plus demand deposits?
  1. AM0
  2. BM1
  3. CM3
  4. DM4
Q19The Pradhan Mantri Jan Dhan Yojana is primarily aimed at:
  1. ACrop insurance
  2. BFinancial inclusion through bank accounts
  3. CAffordable housing
  4. DSkill development

Q20 (statement-based). Consider the following about the Goods and Services Tax:

  1. It is a destination-based tax.
  2. The GST Council is chaired by the Union Finance Minister.
  3. It subsumed central excise, service tax and State VAT. Which are correct?
  • (a) 1 and 2 only
  • (b) 2 and 3 only
  • (c) 1 and 3 only
  • (d) 1, 2 and 3
Q21The Gini coefficient is a measure of:
  1. AInflation
  2. BIncome or wealth inequality
  3. CEconomic growth
  4. DForeign trade
Q22Repo rate is increased by the RBI mainly to:
  1. ABoost growth quickly
  2. BControl inflation by reducing money supply
  3. CIncrease exports
  4. DReduce the fiscal deficit
Q23Disinvestment refers to:
  1. AThe sale of government stake in public sector undertakings
  2. BA fall in foreign investment
  3. CA reduction in bank lending
  4. DThe closure of loss-making private firms
Q24Which index, published by the RBI's reference, is the main basis for retail inflation targeting in India?
  1. AWholesale Price Index
  2. BConsumer Price Index (Combined)
  3. CIndex of Industrial Production
  4. DGDP deflator
Q25Priority Sector Lending norms require banks to lend a fixed share of credit to sectors such as:
  1. ALarge corporations
  2. BAgriculture, small enterprises and weaker sections
  3. CForeign trade
  4. DStock market investors

Answer key

Reveal the answer key and full worked solutions
Q Answer
1 (c) Reserve Bank of India
2 (b) Repo rate
3 (b) Monetary Policy Committee
4 (b) 4 percent, band plus or minus 2
5 (b) 101st
6 (c) Income tax
7 (a) A-1, B-2, C-3, D-4
8 (a) Net Domestic Product (NDP)
9 (b) As cash reserves with the RBI
10 (b) NITI Aayog
11 (b) Agriculture and irrigation
12 (b) SEBI
13 (c) Inflation
14 (b) Stagflation
15 (b) Trade in goods and services and transfers
16 (b) 100 days
17 (b) April to March
18 (b) M1
19 (b) Financial inclusion through bank accounts
20 (d) 1, 2 and 3
21 (b) Income or wealth inequality
22 (b) Control inflation by reducing money supply
23 (a) Sale of government stake in public sector undertakings
24 (b) Consumer Price Index (Combined)
25 (b) Agriculture, small enterprises and weaker sections

Explanations

  • Q1. The Reserve Bank of India, established in 1935, is the central bank and monetary authority. See money and banking and the rbi.
  • Q2. The repo rate is the rate at which the RBI lends short-term funds to banks against securities. See money and banking and the rbi.
  • Q3. The six-member Monetary Policy Committee decides the policy repo rate. See money and banking and the rbi.
  • Q4. The framework targets CPI inflation at 4 percent with a tolerance band of 2 to 6 percent; verify the latest review separately. See inflation and prices.
  • Q5. GST was introduced by the 101st Constitutional Amendment, 2016, and rolled out on 1 July 2017. See taxation and gst.
  • Q6. Income tax is a direct tax; GST, customs and excise are indirect taxes. See taxation and gst.
  • Q7. Fiscal deficit is total expenditure minus receipts excluding borrowings; revenue deficit and primary deficit follow the standard definitions. See budget and fiscal policy.
  • Q8. GDP at market prices minus depreciation gives Net Domestic Product. See basics national income and growth.
  • Q9. CRR is the share of net deposits banks must hold as cash reserves with the RBI. See money and banking and the rbi.
  • Q10. NITI Aayog replaced the Planning Commission on 1 January 2015. See planning and niti aayog.
  • Q11. The First Plan (1951 to 1956), based on the Harrod-Domar model, prioritised agriculture and irrigation. See planning and niti aayog.
  • Q12. SEBI, set up in 1992, regulates the securities market. See money and banking and the rbi.
  • Q13. Inflation is a sustained rise in the general price level. See inflation and prices.
  • Q14. Stagflation combines stagnant growth, high unemployment and high inflation. See inflation and prices.
  • Q15. The current account covers trade in goods and services, primary income and current transfers; capital flows sit in the capital account. See external sector trade and bop.
  • Q16. MGNREGA guarantees 100 days of wage employment per rural household per year. See major economic schemes.
  • Q17. India's financial year runs from 1 April to 31 March. See budget and fiscal policy.
  • Q18. M1 (narrow money) is currency with the public plus demand deposits with banks. See money and banking and the rbi.
  • Q19. PMJDY aims at financial inclusion by providing basic bank accounts to the unbanked. See major economic schemes.
  • Q20. GST is destination-based, the GST Council is chaired by the Union Finance Minister, and it subsumed central excise, service tax and State VAT; all three are correct. See taxation and gst.
  • Q21. The Gini coefficient, between 0 and 1, measures income or wealth inequality. See poverty unemployment and inclusive growth.
  • Q22. Raising the repo rate makes borrowing costlier, reduces money supply and helps cool inflation. See inflation and prices.
  • Q23. Disinvestment is the sale of the government's equity stake in public sector undertakings. See budget and fiscal policy.
  • Q24. Retail inflation targeting uses the Consumer Price Index (Combined) compiled by the NSO. See inflation and prices.
  • Q25. Priority Sector Lending directs credit to agriculture, micro and small enterprises, and weaker sections. See money and banking and the rbi.

Cross-references

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