public finance fiscal & monetary policy section 2 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Black market is the market in which illegal goods are traded. Goods acquired illegally take one of two price levels:

1. they may be cheaper than legal market prices as the supplier does not have to pay for production costs or taxes; or
2. they may be more expensive than legal market prices as the product is difficult to acquire or produce, dangerous to handle or not easily available legally.

Black-market transactions typically occur as a way for participants to avoid government price controls or taxes, conducting transactions 'under the table.'

So the most defining feature of black markets is that they have to be carried out secretly as they are illegal.

Answer: (c)

Internal debt, Other internal liabilities and External debt are three components of Public debt wherein Internal debt include market loans from banks and financial institutions, short-term borrowings on treasury bills and other bonds and certificates issued by the government.

External debt includes loans from foreign countries and international financial institutions like the World Bank, IMF, ADB, etc.

Other internal liabilities includes small saving schemes, provident fund, a reserve fund of the railways, post and telegraph on which the central government has to pay interest

Answer: (b)

Custom duty is a tax on imports imposed on an ad valorem basis, i.e, fixed in the form of a percentage on the value of the commodity imported.

Answer: (d)

Non-plan expenditures include non-developmental expenditure (interest payment, subsidies, defence expenditure, civil administration), developmental expenditure and expenditure incurred on projects which remained unfinished in the earlier plans.

Answer: (c)

It is used to achieve the objectives of balanced economic development, full employment or to establish a welfare state Economics takes care of various needs and wants of life

Answer: (c)

SLR or the Statutory Liquidity Ratio is that ratio of total deposits which a commercial bank has to maintain with itself at any given point of time in the form of liquid assets like cash in hand, current balances with other banks and first-class securities which can be turned into cash (gold, cash or other approved securities).

This ratio at present is 25%. Some assets have to be in liquid form to take care of financial emergencies which every bank has to face. It regulates the credit growth in India.