public finance fiscal & monetary policy section 4 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Answer: (c)

Government debt (also known as public debt, national debt) is the debt owed by a central government. Government debt is one method of financing government operations, but it is not the only method.

Governments can also create money to monetize their debts, thereby removing the need to pay interest. But this practice simply reduces government interest costs rather than truly cancelling government debt. Governments usually borrow by issuing securities, government bonds and bills.

Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions.

Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against.

Answer: (b)

A country going for foreign aid has to take several precautions.

However, two major precautions are: Keeping the borrowing level low so that country does not fall into a debt trap, and Keeping foreign aid strings-free

Answer: (c)

The Concurrent List or List-III is a list of 47 items given in Part XI of the Constitution of India, concerned with relations between the Union and States. Stock exchanges and futures markets come under the Union List.

Answer: (b)

A parallel economy (black economy) indicates the functioning of an unsanctioned sector in the economy whose objectives run parallel with the social objectives.

A major contributory factor to such an economy is black money which is any money that a person or an organization acquires by a means that involves tax evasion.

It is that income from illegal activities that are not reported to the government for tax purposes.

Answer: (b)

Nicholas Kaldor’s seminal work, titled ‘An Expenditure Tax,’ was brought out in 1955. Kaldor asked to levy a tax on a person’s expenditure (consumption), instead of on his income.

When expenditure is made the basis of taxation, the problems created by the non-comparability of various types of accruals of wealth resolve themselves. This was his major argument in favour of an expenditure tax.