taxes types, methods & budgeting process section 4 MCQ Questions & Answers Detailed Explanation
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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq
- Consumption of cigarettes
- Research for new technologies
- Burning of fossil fuels
- 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
The correct answers to the above question in:
Answer: (b)
A Pigovian tax is applied to a market activity that is generating negative externalities (costs for somebody else) like cigarette consumption, burning of fossil fuel.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
Consider the following statements regarding ‘Fiscal Consolidation’ policy:
- It is an effort by the government to bring down the fiscal deficit
- It is an effort to reduce public debt
- It is an effort to reduce the current account deficit
- 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
Answer »Answer: (a)
Fiscal Consolidation policy is an effort by the Government to bring down the fiscal deficit.
It is an effort to reduce public debt, raise revenues and bring down wasteful expenses.
Question : 2
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
Answer »Answer: (a)
The price elasticity of demand for goods also depends on the proportion of the income the buyers spend on the goods.
Therefore, if the sales tax on a commodity is raised, but the revenue earned through its sale decrease sharply, the price elasticity of demand for the commodity would be high.
Question : 3
Consider the following regarding India’s external debt:
- It is around 20% of GDP
- Sovereign Debt is less than 5% of GDP
- External Commercial Borrowings (ECB) has the highest share in India’s external debt
a) (iii) only
b) (i) & (iii) only
c) (i) & (ii) only
d) All of the above
Answer »Answer: (d)
As of June 2019, India’s external debt to GDP ratio stood at approximately 20%. And out of it, Sovereign debt (Govt. of India’s external debt) was around 3.5%.
Total India’s External Debt as of the end of June 2019 stood at $557 billion (20% of GDP) and out of it around more than 200 billion USD was external commercial borrowing (ECB).
Question : 4
Which of the following statements are true regarding "fiscal stimulus":
- It is a strategy to boost the sluggish economy
- RBI pumps money into the economy
- Government reduces subsidies
- Public spending increases
a) (i), (ii), & (iv) only
b) (i), (iii) & (iv) only
c) (i) & (ii) only
d) (i) & (iv) only
Answer »Answer: (d)
A ‘stimulus’ is an attempt by policymakers to kickstart a sluggish economy through a package of measures.
In the case of fiscal stimulus, the Government increases its spending and or slashes tax rates to put more money in the hands of consumers.
A monetary stimulus will see the central bank expanding money supply or reducing the cost of money (interest rates), to spur consumer spending.
Question : 5
The government can influence private sector expenditure by
- taxation
- subsidies
- macro-economic policies
- grants
a) 1, 2 and 3
b) 1, 2, 3 and 4
c) 1, 2 and 4
d) 3 and 4
Answer »Answer: (a)
The government influences private sector expenditure by taxation, subsidies and macro-economic policies.
Question : 6
As per the FRBM Act 2003, Central Government shall endeavour to ensure that:
- The general government debt shall not exceed 60% of GDP by 2024-25
- The central government debt shall not exceed 40% of GDP by 2024-25
- 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
Answer »Answer: (d)
The N.K. Singh committee recommendations of Central Govt. debt of 40% of GDP and General Government (Centre and States combined) debt of 60% of GDP has been put under the FRBM Act 2003 by introducing an amendment through Finance Act 2018.
The additional guarantee of 0.5% of GDP was there from the beginning of the FRBM Act 2003.
Basically, the central government acts as a guarantor when PSUs borrow and States borrow from abroad.
GET Taxes Types, Methods & Budgeting Process PRACTICE TEST EXERCISES
taxes types, methods & budgeting process section 1
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taxes types, methods & budgeting process section 3
taxes types, methods & budgeting process section 4
taxes types, methods & budgeting process section 5
taxes types, methods & budgeting process section 6
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