Practice Quiz set 4 - indian economy mcq Online Quiz (set-1) For All Competitive Exams
Q-1) The government can influence private sector expenditure by - taxation
- subsidies
- macro-economic policies
- grants
Select the correct answer using the codes given below
(a)
(b)
(c)
(d)
The government influences private sector expenditure by taxation, subsidies and macro-economic policies.
Q-2) Which of the following should be considered for ‘Pigovian taxation’? - Consumption of cigarettes
- Research for new technologies
- Burning of fossil fuels
- Restoration of lost cultural heritage
Choose the correct answer using the codes given below:
(a)
(b)
(c)
(d)
A Pigovian tax is applied to a market activity that is generating negative externalities (costs for somebody else) like cigarette consumption, burning of fossil fuel.
Q-3) From which of the tax following direct taxes gives maximum net revenue to the Government?
(a)
(b)
(c)
(d)
Q-4) Consider the following statements regarding “Vivad se Viswas” scheme proposed in the budget:
- It is only for direct taxes
- The objective is to generate timely revenue for the government
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
The ‘Vivad se Vishwas’ Scheme was announced during the Union Budget, 2020-21, to provide for dispute resolution in respect of pending income tax litigation. Pursuant to the Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (hereinafter called Vivad se Vishwas) was introduced in the Lok Sabha on the 5th of February, 2020 and passed by it on 4th of March, 2020.
The objective of Vivad se Vishwas is to inter alia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.
As per the scheme, the taxpayer is required to pay only the amount of the disputed taxes and will get a complete waiver of interest and penalty provided he pays by March 31, 2020. Those who avail of this scheme after 31st March 2020 will have to pay some additional amount. The scheme will remain open till June 30, 2020.
This scheme covers taxpayers whose case appeals are pending at any level.
Q-5) Consider the following statements regarding IGST:
- It is levied by the Centre on interstate supply of goods
- The IGST rate is equal to CGST plus the SGST/UTGST rate
- The tax revenue is shared equally among the Centre and the consuming State/UT
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
Integrated GST (IGST) is levied by the Centre on inter-state supply of goods and services and on imports and exports (on exports effectively there is no tax) of goods and services.
The IGST rate is equal to CGST and the SGST/UTGST rate. The tax revenue is shared equally among the Centre and the consuming State/UT.
Q-6) India’s external liabilities include which of the following?
- FDI investment in India
- FPI’s debt and equity investments in India
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
If you have purchased shares/equity of a company then it is the liability of the company towards you.
India’s external liabilities include all the investments made in India either in the form of debt or equity. So, it will include everything FDI, FPI (debt and equity both), External Commercial Borrowing, Govt. of India borrowings from abroad, NRI deposits in India.
Total external liabilities are around 41% of GDP, in which both debt and equity are around equally distributed.
Q-7) Consider the following statements:
- Fiscal deficit increases aggregate demand in the economy
- Fiscal deficit is financed by borrowing from RBI
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
When government incurs a fiscal deficit, the expenditure leads to an increase in total demand in the economy.
RBI is not allowed to lend to Government for the long term fiscal deficit bonds as per the FRBM Act 2003.
Q-8) Consider the following statements regarding the government’s fiscal deficit:
- It may be inflationary
- It may not be inflationary
- It raises aggregate demand
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
When government incurs a fiscal deficit, then it spends more on the economy resulting in an increase in total/aggregate demand. But if total supply also increases, then inflation may not increase. So, the government’s fiscal deficit will necessarily increase aggregate demand but may not increase effective demand. So, (i) the statement is true.
When the economic capacity is fully (100%) utilized and the government spends more than demand increases in the economy but supply may not immediately increase and the companies will have to set up new capacity which may increase cost, resulting in inflation.
But if the economic capacity is underutilized, because of less demand and then the government spends more then the increase in aggregate demand will be met by increased supply, and there may not be inflation.
So, fiscal deficit may or may not cause inflation.
Q-9) Which of the following statements are correct?
- Progressiveness in personal income tax can be increased by having more tax slabs
- Redistribution of income can help in stimulating the economy by increasing consumption
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
Progressive tax means a higher income tax rate is high. Now in personal income tax (PIT), we have different slabs.
For example, for an Income Slab of less than Rs. 2.5 lakh 0% tax rate. For Rs. 2.5 to 5 lakhs income slab the tax rate is 5% etc.
For income of above Rs. 10 lakh the rate is 30%, which means who earn Rs. 15 lakhs, he also pays 30% and those who earn 30 lakhs, they also pay 30%.
But if we create another slab that income is above Rs. 20 lakhs the rate will be 35%, then it will be more progressive.
Redistribution of income means taking money from the rich and giving it to the poor.
When money is with rich people it may not increase their consumption much because they are already consuming everything but when it reaches the poor, they will be able to consume more with the same money, which increases the demand for goods and services in the economy.
So, income redistribution helps in stimulating the economy.
Q-10) Which of the following is the characteristic of progressive tax? - Marginal tax rate should be increasing.
- Marginal tax rates should be more than average tax rate.
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
A progressive tax is a tax in which the tax rate increases as the taxable base amount increases Regarding progressive tax, marginal tax rate should be increasing and it should be more than average tax rate.