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

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.

Answer: (b)

Fourteenth finance commission would recommend on sharing of tax proceeds between the Centre and the states which will apply for a five-year period beginning April 1, 2015.

It will suggest steps for the pricing of public utilities such as electricity and water. It would review the state of finances, deficit and debt levels of the Centre and states.

Answer: (b)

The RBI implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, moral persuasion and through many other instruments.

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.

Answer: (d)

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