public finance fiscal & monetary policy section 3 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 7 EXERCISES
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The following question based on Fiscal Policy, Public Finance and Monetary Policy topic of indian economy mcq
- It is a method of repayment of public debt.
- It is created by the government out of budgetary revenues every year.
(a) Both 1 and 2
(b) Only 2
(c) Oniy 1
(d) Neither 1 nor 2
The correct answers to the above question in:
Answer: (c)
A sinking fund is a fund created by the government and gradually accumulated every year by setting aside a part of current public revenue in such a way that it would be sufficient to pay off the funded debt at the time of maturity.
Under this method, the aggregate burden of public debt is least felt, as the burden of taxing the people to repay the debt is spread evenly over the period of the accumulation of the fund. The preferable alternative for the government is to raise a new loan and credit the proceeds of the sinking fund. It is a separate fund established by a government.
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Read more public finance fiscal and monetary policy Based Indian Economy Questions and Answers
Question : 1
What are the main components of basic social infrastructure of an economy ?
a) Industry, Trade and Transport
b) Education, Health and Civil amenities
c) Education, Industry and Agriculture
d) Transport, Health and Banks
Answer »Answer: (b)
Social infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment and social welfare.
It includes health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures; the educational and research system, including elementary and secondary schools, universities, specialised colleges, research institutions; Social welfare systems; Sports and recreational infrastructure, such as parks, sports facilities, the system of sports leagues and associations; Cultural infrastructure; and business travel and tourism infrastructure, including both manmade and natural attractions, etc.
Question : 2
Which of the following statements of the government gives expression to its fiscal policy?
- Annual financial statement
- Deficit financing
- Open capital account
a) 1 only
b) 3 only
c) 1 and 2
d) 1, 2 and 3
Answer »Answer: (a)
Fiscal policy is expressed by the budget
Question : 3
Which one of the following items is not included in the current account of India’s Balance of Payments ?
a) Transfer payments
b) Non-monetary gold movements
c) Short-term commercial borrowings
d) Investment income
Answer »Answer: (b)
Balance of payments (BoP) accounts is an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services, financial capital, and financial transfers. The two principal parts of the BOP accounts are the current account and the capital account.
The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.
Some of the components of the current account of BOP include investment income; borrowing entities in respect of their external commercial borrowing; secondary income account (transfer payments); primary income account (factor income such as from loans and investments), etc.
Question : 4
State which of the following is correct ? The Consumer Price Index reflects :
a) the growth of the economy
b) the extent of inflation in the prices of consumer goods
c) the standard of living
d) the increasing per capita income
Answer »Answer: (b)
A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The annual percentage change in a CPI is used as a measure of inflation.
A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values.
Question : 5
The government set up a committee headed by the Chairman, Central Board of Direct Taxes some time back to go into –
a) aspects of generation of black money, its transfer abroad and bringing back such money into India’s legitimate financial system
b) the entire structure of tax laws including the question of imposition of bank tax
c) codification of tax laws
d) the concerns of the foreign investors in India with regard to taxation matters
Answer »Answer: (a)
The Central Board of Direct Taxes (CBDT) panel on black money recently suggested the enactment of new laws, the strengthening of existing legislation and the introduction of deterrent penalties for tax offences to deal with the menace.
In its 66-page report on measures to tackle black money in India and abroad, the CBDT committee also recommended steps to prevent the generation of illicit funds through transactions in property, bullion and equity market.
Besides, the panel, headed by former CBDT Chairman Laxman Das, made a case for strengthening laws relating to investments by FIIs, Participatory Notes (PNs) and routing of funds from Mauritius.
Question : 6
Which of the following statements is/are correct in terms of Direct and Indirect taxes?
- Excise duty and sales tax are examples of indirect taxes
- Taxes like income tax and property tax are direct taxes
- There is no difference between Direct and Indirect tax
a) 1 only
b) 1 and 2
c) 2 only
d) 1, 2 and 3
Answer »Answer: (b)
In the case of direct taxes the burden or ‘incidence’ has to be borne by the taxpayers themselves whereas in the case of an indirect tax, the burden can be shifted to another person
GET Fiscal Policy, Public Finance and Monetary Policy PRACTICE TEST EXERCISES
public finance fiscal & monetary policy section 1
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