Public Economics Set 3 MCQs

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.