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

Question : 1

Annual financial statement has to be placed before parliament for every financial year i.e.

1. January 1 to December 31
2. March 31 to April 1
3. April 1 to March 31

a) 1 only

b) 3 only

c) 2 only

d) None of the above

Question : 2

Which one of the following is not an example of indirect tax?

a) Expenditure tax

b) Excise duty

c) Sales tax

d) Customs duty

Question : 3

Beyond a certain point deficit financing will certainly lead to

a) economic stagnation

b) deflation

c) inflation

d) recession

Question : 4

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 : 5

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 : 6

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