public finance fiscal & monetary policy section 4 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
- Budgetary Deficit
- Revenue Deficit
- Fiscal Deficit
- Monetised Deficit
(a) 1 only
(b) 3 only
(c) 1 and 2
(d) 4 only
The correct answers to the above question in:
Answer: (d)
Practice Fiscal Policy, Public Finance and Monetary Policy (public finance fiscal & monetary policy section 4) Online Quiz
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Question : 1
“Functional Finance” is associated with :
a) Abba ‘P’ Lerner
b) Adam Smith
c) Adolph Wogner
d) Adams
Answer »Answer: (a)
Functional finance is an economic theory proposed by Abba P. Lerner, based on the effective demand principle and chartism.
It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.
Question : 2
With reference to ‘Central excise duty’, which of the following statements is/are correct?
- Commodities on which state governments impose excise duties are exempted from the central excise duty
- In recent years large number of goods has come under excise duty. Moreover, the rates of these duties have also been increasing
- Commodities which are produced within the country levied by central excise duty
a) 1 only
b) 3 only
c) 1 and 2
d) 1, 2 and 3
Answer »Answer: (d)
The commodities which are produced within the country are levied by central excise duty.
However, commodities on which state governments impose excise duties (e.g., liquor, drugs) are exempted from the central excise duty
Question : 3
If the tax rate increases with the higher level of income, it shall be called
a) Regressive tax
b) Progressive tax
c) Proportional tax
d) Lump sum tax
Answer »Answer: (b)
A progressive tax is a tax by which the tax rate increases as the taxable base amount increases.” Progressive” describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate.
It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime.
Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence increasingly to those with a higher ability-to-pay.
Question : 4
Which of the following precautions has to be taken by a country going for foreign aid?
- Keeping foreign aid strings-free
- Keeping the borrowing level low so that country does not fall into a debt trap
a) 1 only
b) Both 1 and 2
c) 2 only
d) Neither 1 nor 2
Answer »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
Question : 5
Which of the following is not viewed as national debt ?
a) Provident Fund
b) Long-term Government Bonds
c) Life Insurance Policies
d) National Savings Certificates
Answer »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.
Question : 6
In India, which one among the following formulates the fiscal policy?
a) Reserve Bank of India
b) Finance Ministry
c) Planning Commission
d) Finance Commission
Answer »Answer: (b)
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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