public finance fiscal & monetary policy section 7 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Non-plan expenditure covers

1. interest payments,
2. subsidies (mainly on food and fertilisers),
3. wage and salary payments to government employees,
4. grants to States and Union Territories governments,
5. pensions,
6. police,
7. economic services in various sectors,
8. defence,
9. loans to public enterprises,
10. loans to States, Union Territories and foreign governments.

Answer: (d)

In under-developed countries, deficit-financing has been considered essential for financing the plans of economic development. It is used as a tool for meeting the financial needs of the government, especially in times of war.

It is used for the mobilization of surplus, non-utilized and idle resources in the economy. It is also used as an instrument of economic policy for removing the conditions of depression 4 to raise the level of output and employment.

Answer: (a)

Corporation tax is the tax on income/profit of the organizations. In India, at one time, corporation tax was quite high

Answer: (a)

In 1996, govt introduced minimum Alternate tax (MAT) on companies which escaped the corporation tax net by using the provisions of exemptions, deductions incentives, deprecation and so on

Answer: (b)

In this book, titled ‘The Wealth of Nations, ‘Adam smith only gave four canons of taxation:

1. canon of equity;
2. canon of certainty;
3. canon of convenience; and
4. canon of the economy.