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

Answer: (a)

SLR used by bankers indicates the minimum percentage of deposits that the banks have to maintain in the form of gold, cash or other approved securities..

Answer: (a)

Deficit financing refers to the difference between expenditure and receipts. In public finance, it means the govt. is spending more than what it is earning.

Deficit financing is a necessary evil in a welfare state as the states often fail to generate tax revenue that is sufficient enough to take care of the expenditure of the state.

The basic intention behind deficit financing is to provide the necessary impetus to economic growth by artificial means.

Answer: (d)

Gold is mainly related to the international market as of all the precious metals, it is the most popular as an investment.

Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries, until recent times.

The gold price has shown a long term correlation with the price of crude oil.

Answer: (b)

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: (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.