public finance fiscal & monetary policy section 7 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Bank rate is an instrument of monetary policy which is the rate at which RBI lends to commercial banks

Answer: (b)

Answer: (d)

Every commercial bank is required to keep a certain percentage of its demand and time liabilities (deposits) with the RBI (either as cash or book balance).

The RBI varies this ratio to change the liquidity of the market. RBI is empowered to fix the CRR at a rate ranging between three per cent and 15 per cent.

Like the Bank Rate, CRR is also subject to frequent changes as RBI intervenes from time to time to correct monetary or exchange rate imbalances. This ratio, currently, is 4%

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.

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

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.