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

Answer: (b)

In terms of individual income and wealth, a regressive tax imposes a greater burden on the poor than on the rich.

There is an inverse relationship between the tax rate and the taxpayer’s ability to pay, as measured by assets, consumption, or income.

These taxes tend to reduce the tax burden of the well-to-do, as they shift the burden disproportionately to the needy.

Answer: (c)

All asset creating and productive expenditure is part of plan expenditure, and all non-productive, consumptive and non- asset-building expenditure is part of non-plan expenditure.

Non-plan expenditure is further divided into revenue expenditure and capital expenditure

Answer: (d)

In economics, an implicit is the opportunity cost equal to what a firm must give up in order to use factors which it neither purchases nor hires.

It is the opposite of an explicit cost, which is borne directly. In other words, an implicit cost is any cost that results from using an asset instead of renting, selling, or lending it. These are costs a business incurs without actually spending money.

Answer: (a)

Value Added Tax (VAT) is imposed on the value added to each commodity by a firm during all stages of production and distribution.

In simple terms, it is a fee assessed against businesses at each step of the production and distribution process, usually whenever a product is resold or value is added to it.

Value-added taxation in India was introduced as an indirect value-added tax (VAT) into the Indian taxation system from 1 April 2005.

Answer: (a)

Answer: (d)

The Shome Committee which was appointed to look into the guidelines of General Anti-Avoidance Rules (GAAR) has recommended retrospective application of tax law only in rarest of rare cases.

It recommends:

1. To correct anomalies in tax laws,
2. to protect the tax base from abusive tax planning schemes with a purpose
3. to avoid tax
4. to correct technical/ procedural defects.