public finance fiscal & monetary policy section 7 MCQ Questions & Answers Detailed Explanation
MOST IMPORTANT indian economy mcq - 7 EXERCISES
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The following question based on Fiscal Policy, Public Finance and Monetary Policy topic of indian economy mcq
(a) Khrushchev
(b) Stalin
(c) Lenin
(d) Kerensky
The correct answers to the above question in:
Answer: (c)
The New Economics Policy was introduced by Vladimir Ilyich Lenin (1870-1924). He was the founder of modern communist Russia. He was the leader of the Soviet Revolution of October 1917.
He liberated the country from the Czars and became Head of its first Communist Government (1917-1924). He dedicated himself to the cause of the workers’ revolution.
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Read more public finance fiscal and monetary policy Based Indian Economy Questions and Answers
Question : 1
Which of the following is the tax imposed on commodities imported into India (import duty) or those exported from India (export duty)?
- Customs duty
- Central excise duty
- Incorporate duty
a) 1 only
b) 3 only
c) 2 only
d) 2 and 3
Answer »Answer: (a)
Customs duty is the tax imposed on commodities imported into India (import duty) or those exported from India (export duty).
Since imposing duties on exports reduced the competitive position of the country, the government withdrew export duties
Question : 2
The incidence of sales tax falls on
a) Producers
b) Wholesale dealers
c) Consumers
d) Retail dealers
Answer »Answer: (c)
In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare.
Tax incidence is said to “fall” upon the group that ultimately bears the burden of, or ultimately has to pay, the tax. The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected but on the price elasticity of demand and price elasticity of supply.
A tax on the sale of goods (sales tax, excise tax) will ultimately be paid by either the consumer or the firm based on elasticities, regardless of who the government actually levies the tax on. If the consumer ultimately pays the tax, it means that the tax incidence falls on the consumer.
If the firm ultimately pays the tax, it means that the tax incidence ultimately falls on the firm.
Question : 3
Taxation is a tool of
a) Wage policy
b) Fiscal policy
c) Monetary policy
d) Price policy
Answer »Answer: (b)
In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure.
Question : 4
Which among the following is/are the main objective of Monetary Policy?
- Maintenance of domestic price level
- Reducing the impact of business cycles
- Stability of external value
a) 1 only
b) 3 only
c) 1 and 2
d) 1, 2 and 3
Answer »Answer: (d)
Objectives of Monetary Policy are:
Stability of external value: Fluctuation in the exchange rate of a currency affects foreign trade and investment.
It is, therefore, important that the rate of exchange is maintained without violent fluctuations. Maintenance of domestic price level: Fluctuation in prices affects investment decisions.
It also leads to increasing income disparities. However, monetary policy alone cannot ensure the maintenance of domestic prices, as several other factors such as erratic monsoons, changes in tastes, fluctuation in world prices etc., affect domestic prices.
Reducing the impact of business cycles (slumps and booms) by manipulation of credit and interest policy. However, economists are not of the same opinion on whether business cycles are primarily caused by monetary factors.
Question : 5
Indirect taxes by nature are
a) proportional
b) regressive
c) degressive
d) progressive
Answer »Answer: (b)
An indirect tax is one in which the burden can be shifted to others. The taxpayer is not the tax bearer. The impact and incidence of indirect taxes are on different persons.
Since most of the indirect taxes are not progressive in nature, individuals may not mind paying them. In other words, indirect taxes are generally regressive in nature.
Therefore, individuals would not be de-motivated to work and to save, which may increase investment.
Question : 6
When price of a substitute of commodity ‘x’ falls, the demand for ‘x’ :
a) rises
b) remains unchanged
c) falls
d) increases at increasing rate
Answer »Answer: (c)
Cross Price Effect refers to the effect on the demand for a given commodity due to a change in the price of a substitute commodity. A change (increase or decrease) in the price of substitutes directly affects the demand for a given commodity.
When the price of substitute goods (say, coffee) rises, demand for the given commodity (say, tea) also rises at the same price.
It leads to a rightward shift in the demand curve of the given commodity. With the decrease in the price of substitute goods (coffee), demand for the given commodity (tea) also decreases. It shifts the demand curve of the given commodity towards the left.
GET Fiscal Policy, Public Finance and Monetary Policy PRACTICE TEST EXERCISES
public finance fiscal & monetary policy section 1
public finance fiscal & monetary policy section 2
public finance fiscal & monetary policy section 3
public finance fiscal & monetary policy section 4
public finance fiscal & monetary policy section 5
public finance fiscal & monetary policy section 6
public finance fiscal & monetary policy section 7
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