taxes types, methods & budgeting process section 4 MCQ Questions & Answers Detailed Explanation

Question : 1

Which of the following should be considered for ‘Pigovian taxation’?

1. Consumption of cigarettes
2. Research for new technologies
3. Burning of fossil fuels
4. Restoration of lost cultural heritage

a) 1, 2 and 3

b) 1 and 3 only

c) 2, 3 and 4 only

d) 2 and 4 only

Question : 2

Consider the following statements regarding ‘Fiscal Consolidation’ policy:

1. It is an effort by the government to bring down the fiscal deficit
2. It is an effort to reduce public debt
3. It is an effort to reduce the current account deficit
4. It is an effort to raise revenues and bring down wasteful expenses

a) (i), (ii) & (iv) only

b) (iv) only

c) (i), (ii) & (iii) only

d) All of the above

Question : 3

If Sales tax on a commodity is raised, but the revenue earned through its sale decrease sharply, which one of the following statements about the nature of this commodity would be correct?

a) Price elasticity of demand for it is high

b) Price elasticity of demand for it is unity

c) It must be an essential goods

d) Price elasticity of demand for it is low

Question : 4

The government can influence private sector expenditure by

1. taxation
2. subsidies
3. macro-economic policies
4. grants

a) 1, 2 and 3

b) 1, 2, 3 and 4

c) 1, 2 and 4

d) 3 and 4

Question : 5

As per the FRBM Act 2003, Central Government shall endeavour to ensure that:

1. The general government debt shall not exceed 60% of GDP by 2024-25
2. The central government debt shall not exceed 40% of GDP by 2024-25
3. The central government shall not give additional guarantees on loans in excess of 0.5% of GDP in any financial year

a) (iii) only

b) (i) & (ii) only

c) (ii) only

d) All of the above

Question : 6

Which of the following is the characteristic of progressive tax?

1. Marginal tax rate should be increasing.
2. Marginal tax rates should be more than average tax rate.

a) Both 1 and 2

b) 1 only

c) 2 only

d) Neither 1 nor 2