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

Answer: (b)

Answer: (d)

Financial inclusion in India includes initiative of scheduled commercial banks, formation of RRB and adoption of village by bank branches.

Answer: (d)

Buoyancy means the growth/increase in tax collections. This is in line with the GDP growth within the economy, the industry profile and the tax structure administered by the government. Tax buoyancy measures the total response of tax revenues to changes in national income.

Total response takes into account both increases in income and discretionary changes (i.e., tax rates and bases) made by tax authorities in the system. The responsiveness of tax revenues to discretionary changes in the tax rate and in the tax base in relation to the GDP is termed the buoyancy of the tax system.

Therefore, tax buoyancy is a measure of both the soundness of the tax bases and the effectiveness of tax changes in terms of revenue collection. Tax elasticity, on the other hand, measures the pure response of tax revenues to changes in the national income.

Answer: (a)

Treasury bills are instruments of short-term borrowing by the Government of India, issued as promissory notes under discount.

The interest received on them is the discount which is the difference between the price at which they are issued and their redemption value. They have assured yield and negligible risk of default. They are thus useful in managing short-term liquidity.

At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments.

Answer: (d)

Public debt has three components -

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

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.