introduction to indian economy section 6 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Answer: (d)

The definition of deficit financing is likely to vary with the purpose for which such a definition is needed.

In one sense by deficit financing we mean the excess of government expenditure over its normal receipts raised by taxes, fees, and other sources. In this definition such expenditure whether obtained through borrowing or from the banking system measures the budget deficit. Deficit financing is said to have been used whenever government expenditure exceeds its receipts. In under-developed countries deficit financing may be in two forms:

1. Difference between overall revenue receipts and expenditure
2. Deficit financing may be equal to borrowing from the banking system of the country.

Answer: (b)

Answer: (d)

While the Reserve Bank of India (RBI) has the authority to issue banknotes of denominational values of Rs.2, Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.10,000, the one rupee note was printed and issued by the central government.

The Government of India also has the sole right to mint coins of all denominations.

Answer: (b)

The principal source of State own tax revenues is a sales tax which accounts for about 60 per cent of the total.

The other major components of States own tax revenues according to their revenue share are State excise, registration and stamp duty, motor vehicle and passenger tax, electricity duty, land revenues, professional tax, entertainment taxes and other sundry taxes.

In the wake of economic reforms, several States competitively announced various tax concessions, especially sales tax concessions, to attract private investments.

These tax wars resulted in a considerable reduction in the buoyancy of growth of tax revenues of the States without commensurate gains in terms of private investment.