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

Question : 1

Consider the following statements regarding fiscal policy:

1. Contractionary fiscal policy involves government spending exceeding tax revenue.
2. Expansionary fiscal policy occurs when government spending is lower than tax revenue.

a) 1 and 2 both

b) 2 only

c) 1 only

d) None

Question : 2

Which is incorrect about convertibility?

a) Exchange rate should be based on forces of demand and supply.

b) RBI would become a direct player.

c) Exchange rate should show the strength of the economy.

d) Discourage black market transactions.

Question : 3

Consider the following statements in respect of Financial Commission:

1. It is mandatory to appoint a Finance Commission every five years.
2. Finance Commission lays down the principles governing grant-in-aid to states.
3. Finance Minister is the ex-officio Chairperson of the Finance Commission.
4. The award given by the Finance Commission is binding on Central and State governments.

a) 1, 2, 3 and 4

b) 1, 2 and 3

c) 1, 2 and 4

d) 1, 3 and 4

Question : 4

An instrument of qualitative credit control is

a) Open market operations

b) Credit rationing

c) variable reserve ratio

d) Bank rate

Question : 5

Where was VAT introduced?

1. France
2. USA
3. Australia
4. China

a) 1 only

b) 3 only

c) 1 and 2

d) 1, 2 and 3

Question : 6

According to the provisions of the Fiscal Responsibility and Budget Management [FRBM]. Act, 2003 and FRBM Rules, 2004, the Government is under obligation to present three statements before the parliament along with the Annual Budget. Which one of the following is not one of them?

a) Medium-term Fiscal Policy Statement

b) Fiscal Policy Strategy Statement

c) Macroeconomic Framework Statement

d) Statement showing Short term Fiscal Policy