introduction to indian economy section 11 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Answer: (b)

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

The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.

Answer: (d)

The service sector is one of the three economic sectors. it includes:

1. telecommunication,
2. hospitality industry/tourism,
3. mass media,
4. healthcare/ hospitals,
5. information technology,
6. banking,
7. insurance,
8. investment management,
9. accountancy,
10. legal services,
11. consulting,
12. retail sales,
13. real estate,
14. education.

The maximum contribution to national income comes from the service sector which contributes around 60%.

Answer: (a)

When the prices of commodities, goods and services start declining consistently, the phenomenon is known as deflation. Deflation is because of a fall in the aggregate level of demand.

That is, there is a fall in how much the whole economy is willing to buy and the price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity.

Since this idles the productive capacity, investment also falls, leading to further reductions in aggregate demand.