Monetary & Fiscal Policy MCQ — 609 Practice Questions with Answers

Practice 609 Monetary & Fiscal Policy multiple-choice questions with detailed answers and explanations. Ideal for RAS/RPSC exam preparation.

609 Questions Indian Economy

Q1. The concept of 'moral hazard' in banking refers to:

A Risk that insured parties take more risks because they are protected Correct

B Customers lying on loan applications

C Banks charging high interest rates

D Banks not following ethical practices

Explanation

Moral hazard occurs when entities take excessive risks because they are protected (e.g., banks taking risky loans knowing government will bail them out, or borrowers misusing funds knowing insurance covers default). Deposit insurance and TBTF can create moral hazard.

Q2. Inflation Indexed Bonds (IIBs) are linked to:

A Consumer Price Index (CPI)

B Repo Rate

C GDP Deflator

D Wholesale Price Index (WPI) Correct

Explanation

Inflation Indexed Bonds provide inflation protection by adjusting the principal through an index ratio and paying the coupon on the inflation-adjusted principal. For the RBI's 2013 Inflation Indexed Bonds, the reference index for indexation was the Wholesale Price Index (WPI), not the Consumer Price Index. CPI linkage applied to the separate retail Inflation Indexed National Savings Securities-Cumulative (IINSS-C) product, not to these IIBs.

Q3. The RBI announced OMO purchases of how much to inject durable liquidity in December 2025?

A ₹50,000 crore

B ₹1 lakh crore Correct

C ₹2 lakh crore

D ₹75,000 crore

Explanation

RBI announced ₹1 lakh crore in OMO purchases in two tranches (December 11 and 18) along with a $5 billion USD/INR swap.

Q4. Which committee recommended the establishment of MUDRA Bank?

A MUDRA was a direct policy decision Correct

B Shanta Kumar Committee

C Urjit Patel Committee

D Nachiket Mor Committee

Explanation

MUDRA (Micro Units Development & Refinance Agency) was established in 2015 as a direct policy decision under PM Mudra Yojana (PMMY). It is a refinancing institution that provides funding to MFIs, NBFCs, and banks for lending to micro enterprises.

Q5. Under MSF, banks can borrow by dipping into their SLR portfolio up to:

A 3% of NDTL

B 1% of NDTL

C 2% of NDTL Correct

D 5% of NDTL

Explanation

Under MSF, banks can borrow overnight by dipping into their SLR portfolio up to 2% of their Net Demand and Time Liabilities (NDTL).

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Q6. The monetary policy transmission mechanism works through:

A Only exchange rate channel

B Only interest rate channel

C Interest rate channel, credit channel, exchange rate channel, asset price channel

D Only credit channel

Q7. What was the food inflation rate in India in October 2025?

A -2.5%

B -3.8%

C 0.5%

D -5.02%

Q8. Which of the following correctly describes the key change approved in the 56th GST Council meeting (September 2025) regarding India's GST rate structure?

A GST was reduced to a single slab of 12% for all goods and services

B The four-slab structure was retained but rates were uniformly reduced by 2%

C The 12% and 28% slabs were abolished; two primary slabs of 5% and 18% were adopted with a new 40% slab for luxury/demerit goods

D GST was abolished on all food items including packaged goods and beverages

Q9. Social Stock Exchange (SSE) was launched in India in:

A 2020

B 2018

C 2024

D 2022

Q10. Venture Capital Fund is regulated by:

A SEBI

B SIDBI

C RBI

D DPIIT

Q11. By what percentage was the Securities Transaction Tax (STT) on futures contracts increased in Budget 2026-27?

A 50% (from 0.02% to 0.03%)

B 100% (from 0.02% to 0.04%)

C 150% (from 0.02% to 0.05%)

D 200% (from 0.02% to 0.06%)

Q12. IRDA regulates:

A Securities market

B Insurance sector

C Pension sector

D Banking sector

Q13. What was the percentage increase in the MNRE (Ministry of New and Renewable Energy) allocation in Union Budget 2026-27?

A 15.5%

B 22.3%

C 30.1%

D 45.2%

Q14. The Monetary Policy Committee (MPC) of RBI consists of how many members?

A 9

B 7

C 5

D 6

Q15. The concept of 'Zero-Based Budgeting' was first applied in India during which Prime Minister's tenure?

A Jawaharlal Nehru

B Morarji Desai

C Rajiv Gandhi

D Indira Gandhi

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Frequently Asked Questions

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There are 609 Monetary & Fiscal Policy practice MCQs available on Aspirant Academy, with detailed answers and explanations for each question.

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Yes, every Monetary & Fiscal Policy question comes with the correct answer and a detailed explanation to help you understand the underlying concept.

How is Monetary & Fiscal Policy relevant to the RAS/RPSC exam?

Monetary & Fiscal Policy falls under the Indian Economy section of the RAS/RPSC syllabus. It is a frequently tested area and regular practice with these MCQs will strengthen your preparation.

Can I practice Monetary & Fiscal Policy questions in Hindi?

Yes, Aspirant Academy offers bilingual support. You can practice Monetary & Fiscal Policy MCQs in both English and Hindi, including questions, options, and explanations.

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Monetary & Fiscal Policy MCQ — 609 Practice Questions with Answers

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