public finance fiscal & monetary policy section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 6

Which of the following is/are types of Budget?

  1. Capital budget
  2. Revenue budget

a) 1 only

b) 2 only

c) 1 and 2

d) Neither 1 nor 2

Answer: (a)

There are two types of budgets

i.e., Revenue budget and Capital budget. The revenue budget contains all current receipts, such as taxation, (central excise, customs duty, corporation tax) dividends of public sector units (PSU’s) and expenditure of the government.

The capital budget consists of all capital receipts and expenditures such as domestic and foreign loans, loan repayment, foreign and etc.

Question : 7

Match columns A and B wherein column B shows the tax to GDP ratio for a respective year in Column A 

Column A Column B
I. 1950-51 a. 10.60 %
II. 2007-08 b. 6 %
III. Present c. 11.89 %
Codes: I II III

a) I-c, II-a, III-b

b) I-b, II-c, III-a

c) I-a, II-c, III-b

d) I-b, II-a, III-b

Answer: (b)

The tax to GDP ratio (centre and states together) was 6 percent in 1950-51, rose to 11.89 in 2007-08 and is currently around 10.60%

Question : 8 [SSC CPO 2003]

An economy is in equili-brium when

a) intended investment exceeds intended savings

b) planned consumption exceeds planned investment

c) planned consumption exceeds planned saving

d) intended investment equals intended investment

Answer: (d)

In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences, the (equilibrium) values of economic variables will not change.

The condition of equilibrium of income is the equality of intended saving and intended investment. An economy is in equilibrium when total savings equal total investment.

Question : 9

In which year was Service tax introduced?

  1. 1983-84
  2. 1994-95
  3. 1967-68
  4. 2003-2004

a) 1 only

b) 3 only

c) 2 only

d) 4 only

Answer: (c)

Service tax was introduced in 1994-95 to address the asymmetric and distortionary treatment of goods and services in tax framework and to widen the tax net

Question : 10

Match the following:

List List II
(Planets) (Satellites)
1. Fiscal deficit A. Excess of total expenditure over total receipts less borrowing
2. Budget deficit B. Excess of total expenditure over total receipts
3. Revenue deficit C. Excess of revenue expenditure over revenue receipts
4. Primary deficit D. Excess of total expenditure over total receipts less borrowings and interest payments
Select the answer using the following codes: 1 2 3 4

a) C A D B

b) A B C D

c) B A C D

d) D A B C

Answer: (b)

  1. Fiscal deficit is excess of total expenditure over total receipts less borrowing.
  2. Budget deficit is excess of total expenditure over total receipts.
  3. Revenue deficit is excess of revenue expenditure over revenue receipts.
  4. Primary deficit is excess of total expenditure over total receipts less borrowings and interest payments.

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