public finance fiscal & monetary policy section 5 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Answer: (a)

Income tax, fringe tax, interest tax all are direct taxes paid directly to the government by the persons on whom it is imposed.

Answer: (d)

A value-added tax (VAT) is a form of consumption tax. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer.

VAT comes under the single tax system based primarily or exclusively on one tax, typically chosen for its special properties. Most of the Indian States have replaced Sales tax with Value Added Tax (VAT) from 1 April 2005.

VAT is imposed on goods only and not services and it has replaced sales tax.

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

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.

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:

1. Share issue privatization (SIP) - selling shares on the stock market;
2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model;
3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price; and
4. Privatization from below - Start-up of new private businesses in formerly socialist countries.