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Public Finance and Fiscal Policy 02
Question
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of 15
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Q1. The ‘Laffer Curve’ represents the relationship between:
A.
Inflation and Unemployment
B.
Tax rates and Tax revenue
C.
Growth and Inequality
D.
Exports and Imports
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
B
The Laffer Curve suggests there is an optimal tax rate that maximizes total government tax revenue.
Q2. Fiscal Policy in India is formulated by:
A.
RBI
B.
Finance Ministry
C.
NITI Aayog
D.
SEBI
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
B
The Ministry of Finance formulates the fiscal policy, while the RBI handles monetary policy.
Q3. Who headed the 15th Finance Commission?
A.
Y.V. Reddy
B.
N.K. Singh
C.
Vijay Kelkar
D.
C. Rangarajan
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
B
N.K. Singh served as the Chairman of the 15th Finance Commission of India.
Q4. Which committee is related to the ‘Tax Reform’ in India?
A.
Raja Chelliah Committee
B.
Narsimham Committee
C.
Verma Committee
D.
Abid Hussain Committee
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
A
The Tax Reforms Committee (1991) under Raja Chelliah laid the roadmap for modernizing the tax system.
Q5. Who is the Chairman of the GST Council?
A.
Prime Minister
B.
Union Finance Minister
C.
RBI Governor
D.
NITI Aayog CEO
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
B
The Union Finance Minister chairs the Goods and Services Tax Council.
Q6. The ‘budget deficit’ refers to the:
A.
Excess of expenditure over revenue receipts
B.
Difference between revenue receipts and expenditure
C.
Difference between all receipts and all expenditure
D.
Fiscal deficit less interest
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
C
Total budget deficit is the gap between total receipts (capital + revenue) and total expenditure.
Q7. Important means of resource transfer from Centre to States include
A.
tax sharing
B.
grant-in-aids
C.
loans
D.
All the above
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
D
The Finance Commission determines the formula for these transfers to ensure fiscal federalism.
Q8. Which is NOT a canon of taxation given by Adam Smith?
A.
Canon of Equity
B.
Canon of Certainty
C.
Canon of Convenience
D.
Canon of Elasticity
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
D
Smith's four canons are Equity, Certainty, Convenience, and Economy. Elasticity is a modern addition.
Q9. A Budget where income is greater than expenditure is a
A.
Surplus Budget
B.
Deficit Budget
C.
Balanced Budget
D.
Zero Based Budget
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
A
A surplus budget indicates that the government is withdrawing more from the economy than it is spending.
Q10. VAT (Value Added Tax) is imposed
A.
Directly on consumer
B.
On final stage
C.
On first stage
D.
On all stages between production and sale
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
D
VAT is a multi-point tax on value addition at each stage of the supply chain.
Q11. Development expenditure of the Central government does not include
A.
defence expenditure
B.
expenditure on economic services
C.
expenditure on social services
D.
grant to states
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
A
Defence expenditure is categorized as Non-Developmental expenditure as it does not directly lead to productive asset creation.
Q12. Revenues received by Union govt go into
A.
Public Account of India
B.
Contingencey Fund of India
C.
Consolidated Fund of India
D.
None
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
C
Article 266(1) mandates that all revenues received by the Union go into the Consolidated Fund of India.
Q13. Which one of the following is the most important of non-plan expenditure?
A.
Interest payment
B.
Fertiliser subsidies
C.
Loans to public enterprises
D.
Defence
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
A
Interest payments on past borrowings typically constitute the largest share of non-plan/revenue expenditure.
Q14. States earn maximum revenue through
A.
land revenue
B.
custom revenue
C.
commercial taxes
D.
excise duties
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
C
Sales tax/VAT (now SGST portion) has historically been the largest source of own-revenue for states.
Q15. On which day is the Union Budget usually presented to the Parliament? (Historical)
A.
15th March
B.
11th April
C.
26th January
D.
Last day of February
ANSWER & SOLUTION
MARK FOR REVIEW
Correct Answer:
D
Historically, the budget was presented on the last day of February; it was moved to Feb 1st in 2017.
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