public finance fiscal & monetary policy section 5 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
(a) Government has its own budget constraints.
(b) Government have no other source of revenue.
(c) They constitute the major source of government revenue.
(d) Most PSUs are run inefficiently.
The correct answers to the above question in:
Answer: (c)
Benjamin Franklin’s utterance, “In this world, nothing can be said to be certain, except death and taxes,” when applied in economics means that the largest amount of revenue raised by governments comes from taxation.
The proverb draws on the actual inevitability of death to highlight the difficulty in avoiding the burden of taxes.
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Question : 1
Excess of total expenditure over total revenues is termed as
- Revenue deficit
- Fiscal deficit
- Budget deficit
- Overall deficit
a) 1 only
b) 3 only
c) 1 and 2
d) 4 only
Answer »Answer: (b)
Budget deficit is the overall deficit i.e., the excess of total expenditure over total revenues. It includes both capital and revenue items in receipts and expenditure. Traditionally, deficit financing in Indian budgets had meant filling this gap
Question : 2
With reference to the Indian Public Finance, consider the following statements.
- External liabilities reported in the Union Budget are based on historical exchange rates.
- The continued high borrowing has kept the real interest rates high in the economy.
- The upward trend in the ratio of Fiscal Deficit to GDP in recent years has an adverse effect on private investments.
- Interest payments is the single largest component of the non-plan revenue expenditure of the Union Government.
a) 1, 2 and 3
b) 2, 3 and 4
c) 1 and 4
d) 1, 2, 3 and 4
Answer »Answer: (b)
Question : 3
A high fiscal deficit is a cause for concern for any economy. What does it denote?
a) It is a measure of the borrowing of an economy
b) it means the lack of liquidity and earnings for the economy
c) It is total expenditure less total receipts excluding borrowings
d) It reflects the decrease in tax collections for the year
Answer »Answer: (c)
Question : 4
Disinvestment in Public Sector is called
a) Privatisation
b) Globalisation
c) Liberalisation
d) Industrialisation
Answer »Answer: (a)
Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a non-profit organization.
The term can also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.
There are four main methods of privatization:
- Share issue privatization (SIP) - selling shares on the stock market;
- Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model;
- Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price; and
- Privatization from below - Start-up of new private businesses in formerly socialist countries.
Question : 5
Ad Valorem tax is levied
a) according to value added by the finance ministry
b) according to value addition to a commodity
c) according to value added by the Government.
d) according to value given by producers
Answer »Answer: (d)
An ad valorem tax (Latin for "according to value") is a tax based on the value of the real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price.
It is levied on the basis of the value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure.
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public finance fiscal & monetary policy section 1
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