introduction to indian economy section 8 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Value Added Tax (VAT) is a tax applied on the value that is added to goods and services at each stage in the production and distribution chain.

It forms part of the final price the consumer pays for the goods or services. On the domestic market, VAT is collected in stages, by registered manufacturers, wholesalers, retailers and services providers.

It is only individuals and firms registered with the VAT Service who can charge VAT on their supplies. However, the collection of the tax at more than one stage does not lead to duplication of the tax.

VAT is designed to ensure that most forms of consumer spending are taxed evenly and fairly. VAT is not a tax on the seller for it is the buyer who pays the tax. VAT will not be an additional tax, but a replacement for some existing indirect taxes.

It will be a broad-based, comprehensive and simplified system of taxation on transactions. VAT will improve, simplify and modernize the tax system.

Answer: (a)

During last decade tertiary sector has shown remarkable expansion. The economy is divided into three sectors on the basis of activities–primary, secondary and tertiary.

Primary sector is involved in agriculture, Secondary sector is involved in manufacturing, mining, construction while tertiary sector is involved in trade, transport, communication, banking & other services.

In the last decade, India has expanded maximum in providing services like IT, Telecommunication, Healthcare, Tourism which is contributing around 60% to GDP.

Answer: (d)

Broadly speaking, there are three possible methods to correct Balance of Payments (BOP) imbalances.

These methods are adjustments of

1. exchange rates;
2. adjustment of a nations internal prices along with its levels of demand; and
3. rules-based adjustment.

This can be achieved by vigorous import substitution which means export promotion and devaluation of local currency as then it makes export cheaper to the international market.

Answer: (c)

The tertiary sector of the Indian economy contributes largest to the GNP. During the last decade tertiary sector has shown remarkable expansion. The economy is divided into three sectors on the basis of activities-primary, secondary and tertiary.

Primary sector is involved in agriculture, secondary sector is involved in manufacturing, mining, construction while tertiary sector is involved in trade, transport, communication, banking & other services.

In the last decade, India has expanded maximum in providing services like IT, telecommunication, healthcare, tourism which is contributing around 60% to GDP.

Answer: (a)

India exports were worth 23698 Million USD in September of 2012. Historically, from 1994 until 2012, India Exports averaged 8603.18 Million USD reaching an all-time high of 30418.00 Million USD in March of 2011 and a record low of 1805.00 Million USD in May of 1994. Exports amount to 22% of India’s GDP.

Gems and jewellery constitute the single largest export item, accounting for 16 per cent of exports.

India is also a leading exporter of textile goods, engineering goods, chemicals, leather manufactures and services. India’s main export partners are European Union, United States, United Arab Emirates and China.

Answer: (a)

Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.