10 Mar 2022

TNPSC Indian Economy – Fiscal and Monetary Policy

TNPSC Indian Economy – Fiscal and Monetary Policy:

For the TNPSC Group 2 Prelims Exam, Indian Economics questions are more important. You will receive 6-8 points for the Indian Economy section. On this page, TNPSC Group 2, Group 2a, and Group 4 TNPSC Indian Economy Study Materials questions with answers are uploaded. Go through the TNPSC Indian Economy – Fiscal and Monetary Policy Notes, Questions, and Answers below for the prelims exam.

Students who are preparing for the group exam concentrate more on the math part. You will easily outperform in the Economics section. For students’ benefit, we upload TNPSC Indian Economy English and Tamil questions and answers in PDF format for download. TNPSC aspirants can download it and use it for the group prelims exam. Please download the TNPSC Indian Economy PDF given below:

The Two Faces of Monetary Policy:


1. Borrowing is easy
2. Consumers buy more
3. Businesses expand
4. More people are employed
5. People spend more


1. Borrowing is difficult
2. Consumers buy less
3. Businesses Postpone expansion
4. Unemployment increases
5. Production is reduced

Objectives of Monetary Policy:

The specific objectives of monetary policy are,

1. Neutrality of Money
2. Stability of Exchange Rates
3. Price Stability
4. Full Employment
5. Economic Growth
6. Equilibrium in the Balance of Payments

Statutory Liquidity Ratio (SLR):

  • It is the amount that a bank has to maintain in the form of cash, gold, or approved securities.

Cash Reserve Ratio (CRR):

  • Banks are required to hold a certain proportion of their deposits in the form of cash with RBI. This is known as CRR.

Monetary Policy:

  • It is the macroeconomic policy laid down by the Central Bank for the management of money supply and interest rates.

Capital Market:

  • It is a financial market in which long-term debt or equity-backed securities are bought and sold.


  • It is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency.

Indian Economy – Fiscal and Monetary Policy Question and Answers:

MCQs on monetary policy and fiscal policy are given below.

Multiple choice questions:

1. A Bank is a ____________.
a) Financial institution   b) Corporate   c) An Industry  d) Service institutions

2. A Commercial Bank is an institution that provides services
a) Accepting deposits b) Providing loans c) Both a and b  d) None of the above

3. The Functions of commercial banks are broadly classified into
a) Primary Functions b) Secondary functions c) Other functions d) a, b, and c

4. Bank credit refers to __________.
a) Bank Loans  b) Advances c) Bank loans and advances d) Borrowings

5. Credit creation means.
a) Multiplication of loans and advances  b) Revenue  c) Expenditure  d) Debt

6. NBFI does not have ___________.
a) Banking license b) government approval  c) Money market approval  d) Finance ministry approval

7. Central bank is the ————— authority of any country.
a) Monetary b) Fiscal c) Waged) National Income

8. Who will act as the banker to the Government of India?

9. Lender of the last resort is one of the functions of ____________.
a) Central Bank b) Commercial banks c) Land Development Banks d) Co-operative banks

10. Bank Rate means _____________.
a) Re-discounting the first class securities b) Interest rate  c) Exchange rate d) Growth rate

11. Repo Rate means ____________.
a) Rate at which the Commercial Banks are willing to lend to RBI
b) The rate at which the RBI is willing to lend to commercial banks
c) Exchange rate of the foreign bank
d) Growth rate of the economy

12. Moral suasion refers ________.
a) Optimization b) Maximization  c) Persuasion   d) Minimization

13. ARDC started functioning from ________.
a) June 3, 1963, b) July 3, 1963, c) June 1, 1963, d) July 1, 1963,

14. NABARD was set up in __________.
a) July 1962  b) July 1972  c) July 1982  d) July 1992

15. EXIM bank was established in _________.
a) June 1982  b) April 1982  c) May 1982  d) March 1982

16. The State Financial Corporation Act was passed by ________.
a) Government of India b) Government of Tamilnadu c) Government of Union Territories d) Local Government.

17. Monetary policy is formulated by _________.
a) Co-operative banks  b)Commercial banks  c) Central Bank  d) Foreign banks

18. Online Banking is also known as ________.
a) E-Banking b) Internet Banking  c) RTGS  d) NEFT

19. Expansions of ATM.
a) Automated Teller Machine  b) Adjustment Teller Machine  c) Automatic Teller mechanism  d) Any Time Money

20. 2016 Demonetization of currency includes denominations of
a) Rs.500 and Rs.1000  b) Rs.1000 and Rs.2000  c) Rs. 200 and Rs. 500   d) All the above

21. Fiscal policy in India is formulated by __________.
a)  the Finance ministry  b.) the RBI   c.) the SEBI  d). the CSO

22. ______________ is NOT a Central government tax
A. Income tax     B. Customs duty      C. Land Revenue   D. Corporation Tax

23. The major finance for small-scale industries is __________.
A. shares and debentures  B. bank loans  C. public deposits  D. foreign aid

24. ________ is an indirect tax?
A. Customs duty    B. Corporation Tax    C. Wealth tax    D. Gift tax

25. Out of the following which one contributes the minimum amount to the Government’s tax revenue?
A. Excise duty  B. Wealth tax  C. Income tax    D. Customs duty

26. Which of the following is the major source of Government revenue?
A. Direct taxes    B. indirect taxes  C. license fees  D. dividends and profits

27. Direct tax code had come into force from __________.
A. 1st April 2012  B. 1st April 2011  C. 1st April 2010  D. 1st April 2009

28. Indirect tax means
A. direct relationship between tax-payer and the government
B. tax base is income
C. the incidence and impact are on the same person on whom tax is imposed
D. there is no direct relationship between the taxpayer and the Government

29. Excise duties are taxes on __________.
A. sale of goods  B. import of Commodities  C. export of commodities D. production of commodities 

30. Professional tax is levied by __________.
A. Central Government B. State Government  C. Local Bodies  D. Foreign Government

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