public finance fiscal & monetary policy section 6 MCQ Questions & Answers Detailed Explanation

Answer: (d)

The primary market is that part of the capital markets that deals with the issuance of new securities.

Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital.

The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).

Answer: (b)

Regressive tax is one where the proportion of tax paid falls as income rises. The most regressive tax is a poll tax, levied at a fixed rate per person regardless of income.

A tax system can be made regressive by having indirect taxes levied at relatively high rates on goods heavily consumed by the poor

Answer: (d)

Capital formation refers to capital accumulation, referring to the total “stock of capital” that has been formed, or to the growth of this total capital stock.

It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period.

Total capital formation” in national accounting equals net fixed capital investment, plus the increase in the value of inventories held, plus (net) lending to foreign countries, during an accounting period (a year or a quarter).

Capital is said to be “formed” when savings are utilized for investment purposes, often investment in production.