Practice Public finance fiscal and monetary policy - indian economy mcq Online Quiz (set-2) For All Competitive Exams

Black money deals with all illegal economic activities

Bank rate is an instrument of monetary policy which is the rate at which RBI lends to commercial banks

Corporation tax is the tax on income/profit of the organizations. In India, at one time, corporation tax was quite high

In 1996, govt introduced minimum Alternate tax (MAT) on companies which escaped the corporation tax net by using the provisions of exemptions, deductions incentives, deprecation and so on

Service tax was introduced in 1994-95 to address the asymmetric and distortionary treatment of goods and services in tax framework and to widen the tax net

At present, the SLR is 18.00%

A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design

General Anti Avoidance Rules (GAAR) has been introduced as a very important component of the Direct Tax code with the objective of preventing such deals and transactions that are carried out to evade and avoid paying taxes.

In other words, GAAR seeks to prevent such transactions that are carried out by way of aggressive tax planning so as to avoid paying taxes

Public debt has three components -

1. Internal debt,
2. Other internal liabilities and
3. External debt

Because Reserve Requirements are designed as “precautionary measures” and not to stop banks from “excessive” profit. 

Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a non-profit organization.

The term can also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.

There are four main methods of privatization:

1. Share issue privatization (SIP) - selling shares on the stock market;
2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model;
3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price; and
4. Privatization from below - Start-up of new private businesses in formerly socialist countries.

Government debt is the debt owed by a central government. Governments usually borrow by issuing securities, government bonds and bills. Government Bonds are often issued via auctions at Stock Exchanges.

There are two main depository types:

• Book-Entry and
• Certificate.

Insurance policies do not come under government debt. In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

The official goals usually include relatively stable prices and low unemployment. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates.

Monetary authorities in different nations have differing levels of control of economy-wide interest rates.

Functional finance is an economic theory proposed by Abba P. Lerner, based on the effective demand principle and chartism.

It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.

Industries are classified on the basis of the source of raw material. There are two types of industries agro-based and mineral-based industries.

Agro-based industries are the ones that produce jute, cotton, silk, tea, coffee, rubber etc. Mineral-based industries are iron and steel, cement, aluminium, machine tools, and petrochemicals producing industries

In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately has to pay, the tax.

The principle of equity includes both horizontal and vertical. Equity is determined by first assessing an individual’s ability to pay. The idea of the ability to pay principle considers whether or not it is fair to tax someone higher just because that person has the ability and resources to pay.

If it is decided that they should be required to pay more, the question of how much more arises.

These questions can be analyzed through horizontal and vertical equity which are subsets of the ability-to-pay principle. Horizontal equity suggests it is fair for people of equal ability to pay the same amount in taxes.

Vertical equity is the idea that people who have a higher ability to pay more than those who have a lower ability to pay, as long as the increase in tax level is considered to be reasonable.