public finance fiscal & monetary policy section 3 MCQ Questions & Answers Detailed Explanation

Question : 1

In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people’s deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. 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

Question : 2

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

Question : 3

The highest rate of income tax before 1975 was

1. 72.85
2. 97.25
3. 46.89
4. 27.14

a) 1 only

b) 3 only

c) 2 only

d) 3 and 4

Question : 4

Consider the following statements with regard to Statutory Liquidity Ratio (SLR)

1. To meet SLR, Commercial banks can use cash only.
2. SLR is maintained by the banks with themselves.
3. 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

Question : 5

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

Question : 6

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