public finance fiscal & monetary policy section 3 MCQ Questions & Answers Detailed Explanation
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The following question based on Fiscal Policy, Public Finance and Monetary Policy topic of indian economy mcq
- To meet SLR, Commercial banks can use cash only.
- SLR is maintained by the banks with themselves.
- SLR restricts the banks leverage in pumping more money into the economy.
(a) 1, 2 and 3
(b) 2 and 3
(c) 1 and 3
(d) only 2
The correct answers to the above question in:
Answer: (b)
SLR used by bankers indicates the minimum percentage of deposits that the banks have to maintain in the form of gold, cash or other approved securities.
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Question : 1
Which of the following is not a technique of Deficit financing?
- Internal Borrowings
- Counting Currency
- Printing Currency
- External aid and borrowings
a) 1 only
b) 2 and 3
c) 2 only
d) 1, 2, 3 and 4
Answer »Answer: (c)
There are three techniques of Deficit financing: Printing Currency, Internal Borrowings and External aid and borrowings. Counting Currency is not a technique of Deficit financing
Question : 2
In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?
- To enable the Central Bank to control the amount of advances the banks can create
- To make the people’s deposits with banks safe and liquid
- To prevent the commercial banks from making excessive profits
- To force the banks to have sufficient vault cash to meet their day-to-day requirements
a) 1 only
b) 2 and 3 only
c) 1 and 2 only
d) 1, 2, 3 and 4
Answer »Answer: (c)
Because Reserve Requirements are designed as “precautionary measures” and not to stop banks from “excessive” profit.
Question : 3
Which one of the following is not included in current revenue of the Union Government ?
a) Interest payments
b) Non-tax revenue
c) Tax revenue
d) Loans
Answer »Answer: (d)
Loans are not included in the current revenue of the Union Government.
Question : 4
Convertibility of rupee implies
a) being able to convert rupee notes into gold
b) developing an international market for currencies in India
c) allowing the value of rupee to be fixed by market forces
d) freely permitting the conversion of rupee to other currencies and vice versa
Answer »Answer: (d)
Convertibility of rupee implies freely permitting the conversion of rupee to other currencies and vice versa.
Currency Convertibility is the ease with which a country’s currency can be converted into gold or another currency.
Question : 5
A tax is characterised by horizontal equity if its liability is
a) the same for every tax payer
b) similar for tax payers in similar circumstances
c) proportional to the income of tax payers
d) proportional to the expenditure of tax payers
Answer »Answer: (c)
The principle of equity includes both horizontal and vertical. Equity is determined by first assessing an individual’s ability to pay. The idea of the ability to pay principle considers whether or not it is fair to tax someone higher just because that person has the ability and resources to pay.
If it is decided that they should be required to pay more, the question of how much more arises.
These questions can be analyzed through horizontal and vertical equity which are subsets of the ability-to-pay principle. Horizontal equity suggests it is fair for people of equal ability to pay the same amount in taxes.
Vertical equity is the idea that people who have a higher ability to pay more than those who have a lower ability to pay, as long as the increase in tax level is considered to be reasonable.
Question : 6
Tarapore Committee submitted its report on “Full Convertibility on Rupee” in-
a) Current account
b) Special Drawing Rights (SDRs)
c) Capital account
d) Both in current as well as in capital account
Answer »Answer: (c)
GET Fiscal Policy, Public Finance and Monetary Policy PRACTICE TEST EXERCISES
public finance fiscal & monetary policy section 1
public finance fiscal & monetary policy section 2
public finance fiscal & monetary policy section 3
public finance fiscal & monetary policy section 4
public finance fiscal & monetary policy section 5
public finance fiscal & monetary policy section 6
public finance fiscal & monetary policy section 7
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