public finance fiscal & monetary policy section 5 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

An ad valorem tax (Latin for "according to value") is a tax based on the value of the real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price.

It is levied on the basis of the value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure.

Answer: (a)

Privatization is the process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a non-profit organization.

The term can also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.

There are four main methods of privatization:

1. Share issue privatization (SIP) - selling shares on the stock market;
2. Asset sale privatization - selling an entire organization (or part of it) to a strategic investor, usually by auction or by using the Treuhand model;
3. Voucher privatization - distributing shares of ownership to all citizens, usually for free or at a very low price; and
4. Privatization from below - Start-up of new private businesses in formerly socialist countries.

Answer: (c)

Benjamin Franklin’s utterance, “In this world, nothing can be said to be certain, except death and taxes,” when applied in economics means that the largest amount of revenue raised by governments comes from taxation.

The proverb draws on the actual inevitability of death to highlight the difficulty in avoiding the burden of taxes.

Answer: (b)

Budget deficit is the overall deficit i.e., the excess of total expenditure over total revenues. It includes both capital and revenue items in receipts and expenditure. Traditionally, deficit financing in Indian budgets had meant filling this gap

Answer: (b)