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

Question : 16 [UPPCS (Pre) 2009]

Fiscal responsibility and Budget Management Act was enacted in India in the year

a) 2003

b) 2002

c) 2007

d) 2005

Answer: (a)

Question : 17

If a government budgets for a surplus and there is an unexpected increase in the level of economic activity, which of the following is likely to occur?

a) There will be an increase in tax revenues and an increase in the budget surplus

b) There will be a decrease in tax revenues and a decrease in the budget surplus

c) There will be an increase in tax revenues and a decrease in the budget

d) There will be a decrease in tax revenues and an increase in the budget surplus

Answer: (a)

Question : 18 [SSC CPO 2005]

Deficit financing is an instrument of

a) tax policy

b) credit policy

c) monetary policy

d) fiscal policy

Answer: (d)

In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.

The two main instruments of fiscal policy are government taxation and expenditure. Deficit financing is defined as financing the budgetary deficit through public loans and the creation of new money.

Deficit financing in India means the expenditure in excess of current revenue and public borrowing.

Question : 19

Which of the following are included in the category of direct tax in India?

  1. Corporation tax
  2. Tax on income
  3. Wealth tax
  4. Customs duty
  5. Excise duty
Select the correct answer using the codes given below

a) 1, 2 and 3

b) 2 and 3

c) 1, 2, 4 and 5

d) 1, 3, 4 and 5

Answer: (a)

Corporation Tax, Wealth Tax and Income Tax are in the category of direct tax.

Question : 20 [SSC CML 2000]

A mixed economy refers to an economic system where

a) No foreign investment is allowed

b) Only the private sector operates under government control

c) The economy functions with foreign collaboration

d) Both the government and the private sectors operate sectors operate simultaneously

Answer: (d)

Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies.

The basic idea of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that the government wields indirect influence over the economy through fiscal and monetary policies.

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