public finance fiscal & monetary policy section 6 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Answer: (d)

The primary market is that part of the capital markets that deals with the issuance of new securities.

Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is the market for new long term equity capital.

The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).

Answer: (b)

Regressive tax is one where the proportion of tax paid falls as income rises. The most regressive tax is a poll tax, levied at a fixed rate per person regardless of income.

A tax system can be made regressive by having indirect taxes levied at relatively high rates on goods heavily consumed by the poor

Answer: (d)

Capital formation refers to capital accumulation, referring to the total “stock of capital” that has been formed, or to the growth of this total capital stock.

It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period.

Total capital formation” in national accounting equals net fixed capital investment, plus the increase in the value of inventories held, plus (net) lending to foreign countries, during an accounting period (a year or a quarter).

Capital is said to be “formed” when savings are utilized for investment purposes, often investment in production.

Answer: (c)

The Differential Rate of Interest Scheme, formulated in March 1972, offers financial assistance at concessional rate of interest @ 4% to those who intend taking up any productive activity and has been tailored for persons whose income is very low. This scheme is meant for:

• Persons belonging to SC/STs, Adivasis engaged in agricultural operations and/ or allied activities;

• Persons engaged in collection of forest products, fodder and selling these in markets;

• Persons engaged in Village and Cottage Industries on a very small scale; etc.