taxes types, methods & budgeting process section 3 MCQ Questions & Answers Detailed Explanation
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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq
- Increased public sector spending replaces private sector spending
- Governments deficit spending through borrowed money leads to hardening of interest rates
- Government spending uses up financial resources that would otherwise be used by private firms
- Government providing a service or good that would otherwise be a business opportunity for private industry
(a) (i) & (ii) only
(b) (ii) & (iii) only
(c) (i) only
(d) All of the above
The correct answers to the above question in:
Answer: (d)
When the government borrows more, then there may be a decrease in private investment due to a reduction in the amount of savings available to the private sector.
This is because if the government decides to borrow from the private citizens by issuing bonds to finance deficits, these bonds (which are risk-free) compete with corporate bonds and other financial instruments for the available supply of funds.
If people decide to buy government bonds, the funds remaining to be invested in the private sector will be less.
Thus, some private/corporate borrowers will get "crowded out" of the financial markets as the government claims an increasing share of the economy's total savings.
This also increases the interest rate for the private sector.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
Consider the following statements regarding the “Inverted Duty Structure” in international trade:
- It makes domestic manufactured goods less competitive against finished product imports in the domestic market.
- Finished goods are taxed at a higher rate than the raw materials
- Raw materials are taxed at a higher rate than the finished products
- This has reference to Customs Duty
a) (i) & (iii) only
b) (i) & (iv) only
c) (i) & (ii) only
d) (i), (iii) & (iv) only
Answer »Answer: (d)
When the import duty on raw materials is quite higher than the import duty on finished goods then it makes the domestic manufacturers less competitive because then traders start importing manufactured goods in the country rather than manufacturing the goods domestically.
India levies the highest duties on the import of raw rubber and one of the lowest duties on the import of finished rubber goods i.e. tyres. This has created an inverted duty structure.
Question : 2
Value Added Tax was first introduced in India in
a) 2006
b) 2005
c) 2007
d) 2008
Answer »Answer: (b)
Question : 3
Which of the following receipts goes to the Public Account of India:
- Treasury Bills
- Kisan Vikas Patra
- Sukanya Samriddhi Account
- Public Provident Fund
a) (ii) & (iii) only
b) (ii), (iii) & (iv) only
c) (i) & (iv) only
d) All of the above
Answer »Answer: (b)
Receipts under the Public Account account mainly flow from the sale of Savings Certificates, contributions into General Provident Fund, Public Provident Fund, Security Deposits and Earnest Money Deposits (a kind of security deposits) received by the government.
It also includes schemes like Kisan Vikas Patra, Sukanya Samridhi Scheme etc. In respect of such deposits, the government is acting as a Banker or Trustee and refunds the money after the completion of the contract/ event.
All government borrowings through Treasury bills and Dated securities go to the Consolidated Fund of India.
Question : 4
Which of the following are the indirect tax?
a) Income tax and Wealth tax
b) Sales tax and Excise tax
c) Sales tax and Income tax
d) Income tax and Excise tax
Answer »Answer: (b)
Question : 5
MODVAT is related to
a) Wealth Tax
b) Excise duty
c) Value added Tax (VAT)
d) Income Tax
Answer »Answer: (c)
MODVAT e.g. modified value added tax is related to Value added tax e.g. VAT.
Question : 6
Consider the following statements about the Agriculture Income Tax
- Agriculture Income Tax is levied and collected by the Union Government.
- Agriculture Income Tax is levied throughout the country in India.
a) Both 1 and 2
b) 1 only
c) 2 only
d) Neither 1 nor 2
Answer »Answer: (d)
Agricultural income tax is levied on the income from Agriculture.
At present agriculture is subjected to – two direct taxes and they are Agricultural Income Tax and Land Tax.
They are levied by the state governments. Not all states levy agricultural income tax.
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