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

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: (c)

A turnover tax is similar to a sales tax or a VAT, with the difference that it taxes intermediate and possibly capital goods. It is charged on gross sales revenue from business transactions.

Unlike a sales tax, which is levied only on gross value at the point of retail sale, a turnover tax is levied on all intermediate transactions between businesses leading to and including the final sale.

Answer: (b)

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.