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This set of Indian Economy Multiple Choice Questions & Answers (MCQs) focuses on Fiscal System of India Set 4

Q1 | Which of the following is not a direct tax?
  • Estate tax
  • Sales tax
  • Corporation tax
  • Wealth tax
Q2 | All taxes come under:
  • revenue receipts
  • capital receipts
  • public debt
  • both (a) and (b)
Q3 | Estimation of national income in India is difficult due to : I. illiteracy of people II. non-monetised consumption III. inflation IV. people holding multiple jobs
  • I, II, III and IV
  • II and III
  • I and IV
  • I, II and IV
Q4 | The annual financial statement shows the receipts and payments of the government under the 3 parts in which government accounts are kept in : 1. Consolidated Fund 2. Contingency Fund 3. Public Account Which of the following items are covered under the Public Account?
  • All revenue received by the government
  • Loans raised by the government
  • Funds placed at the disposal of the President
  • Transactions relating to provident fund, small savings, etc.
Q5 | 'Liquidity trap' is a situation in which:
  • people want to hold only cash because prices are falling everyday
  • people want to hold only. cash because there is too much of liquidity in the economy
  • the rate of interest is so low that no one wants to hold interest bearing assets and people wants to hold cash
  • there is an excess of foregin exchange reserves in the economy leading to excess of money supply
Q6 | Consider the following: 1. Market Borrowing 2. Treasury Bills 3. Special Securities to the RBI Which of these is/are components of internal debt of the government?
  • 1 only
  • 1 and 2
  • 1 and 3
  • 1, 2 and 3
Q7 | The RBI uses the following instruments for quantitative central of credit:(i) Cash Reserve Ratio (ii) Bank Rate (iii) Open Market Operations (iv) Margin Requirements Choose your answer from:
  • (i) and (ii)
  • (ii) and (iv)
  • (i), (ii) and (iii)
  • (i), (ii), (iii) and (iv)
Q8 | MODVAT is different from VAT in the sense that: 1. under MODVAT, tax is levied only on value addition while under VAT, excise is imposed on final value and then rebate is given on inputs 2. MODVAT is only at the production stage while VAT extends both to production and distribution stage 3. under MODVAT, excise is levied on final value and then rebate is given on inputs while under VAT, tax is levied only on value addition 4. MODVAT implies rationalization of excise duty only while VAT implies rationalization of excise, sales and turnover taxes etc. also Choose correct answer from:
  • 1, 2 and 4
  • 1, 3 and 4
  • 2, 3 and 4
  • 1, 2, 3 and 4
Q9 | Consider the following taxes: 1. Corporation Tax 2. Value Added Tax 3. Wealth Tax 4. Import duty Which of these is/are Indirect taxes?
  • 1 only
  • 2 and 4
  • 1 and 3
  • 1, 2 and 4
Q10 | The tax whose share in overall taxation revenue has gone up rapidly during the planningperiod is :
  • income tax
  • wealth tax
  • capital gains tax
  • tax on production
Q11 | The most appropriate measure of a country's economic growth is the:
  • gross domestic product
  • net domestic product
  • net national product
  • per capita real income
Q12 | When the ratio of indirect taxes to total taxation revenue is very high, it leads to : 1. rise in the price level 2. higher taxation burden on the rich 3. higher taxation burden on the poor 4. fall in tax revenues
  • 1 and 2
  • 1 and 3
  • 1, 2 and 4
  • 1, 3 and 4
Q13 | CENVAT is associated with:
  • rate of indirect tax
  • rate of income tax
  • rate of direct tax
  • none of the above
Q14 | Taxation and the government's expenditure policy are dealt under the :
  • trade policy
  • budget
  • fiscal policy
  • monetary policy
Q15 | Deficit financing leads to inflation in general, but it can be checked if:
  • government expenditure leads to increase in aggregate supply in ratio of aggregate demand
  • aggregate demand is increased only
  • all the expenditure is denoted national debt payment only
  • all the above
Q16 | The budget broadly comprises: (i) revenue budget, and (li) capital budget. Which of thefollowing item or items is/are not covered under the revenue budget? I. Different proceeds of taxes and other duties levied by the government II. Interest and dividend on investments made by the government III. Expenditure on running government and various services IV. Market loans raised by the government
  • III and IV
  • II and III
  • only II
  • only IV
Q17 | Value-added tax is :
  • an ad valorem tax on domestic final consumption collected at all stages between production and the point of final sale
  • an ad valorem tax on final consumption collected at the manufacturing level
  • tax on final consumption collected at the consumption stage
  • a special tax levised by states on products from other states
Q18 | What is the main source of revenue to meet different expenditures?
  • Excise duties
  • Customs duties
  • Internal borrowings
  • Income tax
Q19 | Which one of the following statements regarding the levying, collecting and distribution of Income Tax is correct? [IAS 1999]
  • The Union levies, collects and distributes the proceeds of income tax between itself and the states
  • The Union levies, collects and keeps all the proceeds of income tax to itself
  • The Union levies and collects the tax but all the proceeds are distributed among the states
  • Only the surcharge levied on income tax is shared between the Union and the States
Q20 | What are “Open Market Operations" ? [SSC Graduate 2003]
  • Activities of SEBI-registered brokers
  • Selling of currency by the RBI
  • Selling of gilt-edged securities by the Government
  • Sale of shares by FIIs
Q21 | Which of the following is poorest state in India?
  • Odisha
  • Bihar
  • U.P.
  • M.P.
Q22 | The 'gilt-edged' market deals in : [UP PCS 2002]
  • worn and torn currency notes
  • bullion
  • Govt. securities
  • Corporate bonds
Q23 | How does the consumer benefit with VAT? [CPO SI 2003]
  • It removes tax on tax and thus reduces price-rise
  • It reduces the cost of production
  • With the abolition of the sales tax
  • Due to the exemption of small Businesses from the tax within certain limits prescribed by the State
Q24 | Investment in public works is known as :
  • revenue expenditure
  • capital expenditure
  • current expenditure
  • either (a) or (b)
Q25 | The rising prices in India can be checked through: 1. Budgetary policy 2. Monetary policy 3. Increasing production 4. Increasing income levels Choose your answer from:
  • 1 and 2
  • 1, 2 and 3
  • 1, 2, 3 and 4
  • 2 and 3