Fiscal System of India Set 4 MCQs

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