public finance fiscal & monetary policy section 2 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

Flight of capital refers to the movement of money from one investment to another in search of greater stability or increased returns.

Sometimes, it specifically refers to the movement of money from investments in one country to another in order to avoid country-specific risk (such as high inflation or political turmoil) or in search of higher returns.

Capital flight is seen most commonly in massive foreign capital outflows from a specific country, often at times of currency instability.

Answer: (d)

The excise duty’s share in the total tax revenue, which was 41.3 per cent in 1992-93, declined to 25.1 per cent in 2006-07.

The customs duty’s share in the total tax revenue, which was 31.9 per cent in 1992- 93, fell to 17.5 per cent in 2006-07, as a result of massive structuring on excise and customs.

Answer: (b)

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

The official goals usually include relatively stable prices and low unemployment. The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates.

Monetary authorities in different nations have differing levels of control of economy-wide interest rates.

Answer: (b)

Planned economic development adopted by India required an active monetary policy. The two stated aims of this policy were to boost economic development and control inflationary pressure

Answer: (d)

When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points; the Scheduled Commercial Banks may cut their lending rates.