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This set of Public Economics Multiple Choice Questions & Answers (MCQs) focuses on Public Economics Set 3
Q1 | The Finance Commission is appointed in every
- 3 year
- 4 year
- 5 year
- 6 year
Q2 | The maximum effect of direct taxes is on
- price of food
- income
- capital goods
- consumer goods
Q3 | The Wanchoo Committee (1971) probed into
- direct taxes
- indirect taxes
- agricultural holding tax
- non‐tax revenue
Q4 | Modvat means
- modified value added tax
- moderate value added tax
- modest value added tax
- modern value added tax
Q5 | The revenue of the State Government is raised from the following sources except one,which is that?
- land revenue
- agricultural income tax
- entertainment tax
- expenditure tax
Q6 | The Finance Commission does all the following functions except one, which is that?
- works out allocation of taxes in the divisible pool
- looks into financial relations between the centre and the states
- allocates grants ‐ in – aid to the states and union territories
- assist the planning commission in making 5 year plans.
Q7 | Primary deficit means:
- fiscal deficit‐ interest
- revenue deficit‐interest payments
- fiscal deficit+ revenue deficit
- budgetary deficit
Q8 | Non‐Plan Grants are determined by
- planning commission
- finance commission
- central government
- state government
Q9 | Public Debt Management refers to
- terms of new bonds
- proportion of different components of public debt
- maturity
- all the above
Q10 | Public Expenditure increases
- interest rate
- employment
- exports
- imports
Q11 | Central Assistance for State and UT plan is a part of
- plan expenditure
- revenue expenditure
- non‐plan expenditure
- none of the above
Q12 | There is a view that reduced rates on income tax would lead to a significant rise in incometax revenue. This view has been attributed to
- herbert simon
- arthur laffer
- robert lucas
- j.b. say
Q13 | Functional Finance functions through
- buying and selling
- giving and taking
- lending and borrowing
- all the above
Q14 | The ideal system of public Finance is one where the net benefit is
- maximum
- minimum
- zero
- infinity
Q15 | The principle of Maximum Social Advantage is connected with
- taxation
- expenditure
- public debt
- both (a) and (b)
Q16 | Economic functions of the government are all the following EXCEPT to .
- Control the price level of public goods.
- Create a stable economic environment.
- Increase the level of education.
- Distribute income and wealth.
Q17 | Which of the following does NOT determine the nature of Public Economics?
- Public economics studies the government and how its policies affect the economy.
- Public economics is the study of government policy through the lens of economic efficiency and equity.
- Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social
- Public Economics studies the behaviour of private firms and is called economics of Priavte Sector.
Q18 | Which of the following describes the situation where all taxes and other revenues are less than expenditures during a given period?
- Budget Deficit.
- Budget Surplus.
- Balanced Budget.
- Public Debt.
Q19 | The Fundamental Theorem of Welfare Economics:
- Shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
- Refers to the biblical observation that "the poor ye shall always have with you.
- Implies that no intervention in the workings of markets can be justified on efficiency grounds.
- Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
Q20 | If the economy is in an inflationary period, what action would Fiscal Policy most likely take?
- Decrease the discount rate.
- Increase taxes.
- Decrease taxes.
- Increase spending.
Q21 | Public goods are difficult for a private market to provide due to:
- The free-rider problem.
- The Tragedy of the Commons.
- The public goods problem.
- The rivalness problem.
Q22 | Merit goods are those which, when consumed, generate positive external benefits. This is likely to mean that, in a free market economy, the good will be:
- Over-consumed.
- Over-supplied.
- Subject to VAT.
- Under-supplied.
Q23 | The optimum level of economic activity and associated pollution from society's point of view occurs where:
- Marginal private benefit = Marginal private cost.
- Marginal social benefit < Marginal social cost.
- Marginal social benefit= Marginal social cost.
- Marginal social benefit> Marginal social cost.
Q24 | If pollution by one firm results in higher production costs for another firm, this would be classified as a:
- Negative production externality.
- Negative consumption externality.
- Marginal private cost of production.
- Free Good.
Q25 | In the case of a negative externality, the social marginal cost will:
- Be equal to private marginal cost.
- Exceed the private marginal cost
- Fall short of private marginal cost.
- Bear no significant relation to private marginal cost.