Economy and Development # MCQs Practice set

Q.1 Which of the following is a measure of a country's economic development?

Gross Domestic Product (GDP)

Unemployment Rate

Human Development Index (HDI)

Population Growth Rate

Explanation - HDI combines indicators of life expectancy, education, and per capita income, providing a broader measure of development beyond just economic output.

Correct answer is: Human Development Index (HDI)

Q.2 Which sector contributes the most to India's GDP as of 2025?

Agriculture

Industry

Services

Mining

Explanation - The service sector, including IT, banking, and trade, contributes the largest share to India's GDP, reflecting economic transformation from agrarian to service-based.

Correct answer is: Services

Q.3 What is the main objective of the Make in India initiative?

Encourage foreign investment

Promote domestic manufacturing

Reduce imports

Increase agricultural production

Explanation - Make in India aims to boost domestic manufacturing, create jobs, and enhance India's global manufacturing competitiveness.

Correct answer is: Promote domestic manufacturing

Q.4 Which of the following is considered a direct tax?

Goods and Services Tax (GST)

Income Tax

Excise Duty

Customs Duty

Explanation - Income tax is paid directly by individuals or corporations to the government, unlike indirect taxes which are collected on goods and services.

Correct answer is: Income Tax

Q.5 Inflation in an economy is generally measured using which index?

Consumer Price Index (CPI)

Gross National Product (GNP)

Human Development Index (HDI)

Balance of Payments (BoP)

Explanation - CPI tracks the change in prices of a basket of goods and services over time, serving as a primary indicator of inflation.

Correct answer is: Consumer Price Index (CPI)

Q.6 Which institution is primarily responsible for regulating monetary policy in India?

Reserve Bank of India

Securities and Exchange Board of India

Finance Ministry

NITI Aayog

Explanation - The RBI controls money supply, credit, and interest rates to ensure economic stability and growth.

Correct answer is: Reserve Bank of India

Q.7 What does GDP at market prices include?

Net exports

Indirect taxes minus subsidies

Government expenditure

All of the above

Explanation - GDP at market prices measures total value of goods and services produced, including consumption, investment, government spending, and net exports, adjusted for taxes and subsidies.

Correct answer is: All of the above

Q.8 Which of the following schemes is aimed at financial inclusion in India?

Pradhan Mantri Jan Dhan Yojana

Pradhan Mantri Awas Yojana

Mahatma Gandhi National Rural Employment Guarantee Act

Swachh Bharat Mission

Explanation - PMJDY provides access to banking, savings accounts, credit, and insurance for underserved populations.

Correct answer is: Pradhan Mantri Jan Dhan Yojana

Q.9 Which of the following represents sustainable development?

Rapid industrial growth without environmental checks

Economic growth with minimal environmental impact

Focusing solely on GDP growth

Increasing exports at the cost of local resources

Explanation - Sustainable development balances economic growth, social inclusion, and environmental protection for long-term benefits.

Correct answer is: Economic growth with minimal environmental impact

Q.10 The concept of 'trickle-down economics' suggests that:

Benefits to the rich will eventually benefit the poor

Government should provide subsidies to the poor directly

Wealth should be evenly distributed

Investment in education benefits everyone immediately

Explanation - Trickle-down theory assumes that tax cuts or financial gains for the wealthy will lead to investment, job creation, and income growth for lower-income groups.

Correct answer is: Benefits to the rich will eventually benefit the poor

Q.11 Which of the following is a major objective of the National Institution for Transforming India (NITI Aayog)?

Formulating fiscal policy

Replacing the Planning Commission

Implementing monetary policy

Issuing currency

Explanation - NITI Aayog was established to provide policy direction, cooperative federalism, and strategic thinking in place of the Planning Commission.

Correct answer is: Replacing the Planning Commission

Q.12 Which sector is considered the backbone of India's rural economy?

Agriculture

Manufacturing

Information Technology

Telecommunications

Explanation - Agriculture provides livelihood to the majority of rural population and forms the base for rural development.

Correct answer is: Agriculture

Q.13 Which of the following is an indicator of income inequality?

Gini Coefficient

GDP Growth Rate

Human Development Index

Balance of Payments

Explanation - The Gini coefficient measures income distribution within a population, with higher values indicating greater inequality.

Correct answer is: Gini Coefficient

Q.14 Foreign Direct Investment (FDI) primarily refers to:

Investment by foreigners in domestic businesses

Loans from international banks

Remittances from NRIs

Export earnings from multinational companies

Explanation - FDI involves foreign investors owning a stake in domestic enterprises, helping transfer capital, technology, and skills.

Correct answer is: Investment by foreigners in domestic businesses

Q.15 Which of the following is an example of inclusive growth?

Economic growth that benefits only urban areas

Growth with increased access to education and healthcare for all

Rapid industrialization at the cost of environment

Export-oriented growth without local employment generation

Explanation - Inclusive growth ensures that benefits of economic development are equitably shared across society, including marginalized groups.

Correct answer is: Growth with increased access to education and healthcare for all

Q.16 Which policy focuses on liberalization, privatization, and globalization in India?

Economic Reforms of 1991

Make in India

Digital India

Skill India

Explanation - The 1991 reforms opened up the Indian economy, reduced state control, and encouraged global integration.

Correct answer is: Economic Reforms of 1991

Q.17 Which among the following is a social indicator of development?

Life expectancy

GDP per capita

Fiscal deficit

Export volume

Explanation - Life expectancy reflects health and well-being, providing a measure of social development beyond economic indicators.

Correct answer is: Life expectancy

Q.18 Which of the following schemes promotes entrepreneurship in India?

Startup India

Make in India

Atmanirbhar Bharat

Skill India

Explanation - Startup India provides financial support, regulatory relaxation, and mentorship to promote new businesses and entrepreneurship.

Correct answer is: Startup India

Q.19 Which of the following measures can control inflation in an economy?

Increase in interest rates

Increase in government spending

Reducing taxes for all citizens

Printing more currency

Explanation - Higher interest rates reduce borrowing and spending, thereby controlling excessive demand and inflation.

Correct answer is: Increase in interest rates

Q.20 Which of the following is an example of a capital-intensive sector?

Automobile manufacturing

Handicrafts

Agriculture with traditional tools

Textile weaving by hand

Explanation - Capital-intensive sectors rely heavily on machinery and technology rather than manual labor.

Correct answer is: Automobile manufacturing

Q.21 Which of the following best defines economic growth?

Increase in the production of goods and services

Reduction in unemployment

Equitable distribution of wealth

Improvement in quality of life

Explanation - Economic growth is quantified as the rise in total output or GDP of an economy over time.

Correct answer is: Increase in the production of goods and services

Q.22 Which of the following is a primary objective of government subsidies?

Support vulnerable populations

Increase inflation

Reduce GDP

Promote foreign investments

Explanation - Subsidies aim to make essential goods and services affordable, improving access for the poor and marginalized.

Correct answer is: Support vulnerable populations

Q.23 Which of the following is a key challenge to sustainable development in India?

Environmental degradation

Poverty

Overpopulation