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Federal Finance System in India - General Knowledge Multiple Choice Questions and Answers | Page-3

Questions
21 What does a Leasing Company provide?
A Office accommodation on hire
B Machinery and capital equipment on hire
C Technical consultancy and experts for a fee
D Legal guidance in establishing an enterprise

Answer: Option [B]

The correct answer is Machinery and capital equipment on hire. Leasing provides opportunities to use available money to operate assets that can make more money over time. There are many distinct differences between buying and leasing, regardless if such a transaction or agreement applies to property, machinery, equipment or other assets. The difference lies in that a lease is conceptually very similar to the principle of “borrowing.” The ownership of the leased property (be it land, equipment, merchandise, or etc.) is not transferred under the terms of the lease agreement.

22 Buoyancy of a tax is defined as
A Increase in tax revenue/increase in tax base
B Increase in tax revenue/percentage increase in tax coverage
C Percentage increase in tax revenue /increase in tax coverage
D Percentage increase in tax revenue/percentage increase in tax base

Answer: Option [A]

Buoyancy of a tax is defined as increase in tax revenue/increase in tax base. Tax buoyancy is the relationship among variations in the government's tax income change and the potential in GDP. It has to do with the sensitivity of tax revenue growth to changes in GDP. When a tax collects greater revenue without changing the rate of taxing, it is said to be buoyant.

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23 Economic rent refers to:
A Payment made for the use of capital
B Payment made for the use of labour
C Payment made for the use of land
D Payment made for the use of Organization

Answer: Option [C]

Economic rent refers to payment made for the use of land. Economic rent refers to the amount paid to the owner of a factor of production over the cost that is to be necessarily incurred on utilizing such elements in the production process. These factors of production could include land, labor, capital, etc.

24 The existence of a Parallel Economy or Black Money
A Makes the monetary policies less effective
B Makes the economy more competitive
C Ensures increasing productive investment
D Ensures a better distribution of income and wealth

Answer: Option [A]

The existence of a Parallel Economy or Black Money makes the monetary policies less effective. Parallel or black economy creates hindrance in the effective implementation of monetary policies. This results in unexpected outcomes and it becomes difficult for the institutions to take right corrective measures in the economy.

25 The incidence of sales tax falls on
A Producers
B Retail dealers
C Wholesale dealers
D Consumers

Answer: Option [D]

The incidence of sales tax falls on Consumers. Tax incidence can also be related to the price elasticity of supply and demand. When supply is more elastic than demand, the tax burden falls on the buyers. If demand is more elastic than supply, producers will bear the cost of the tax.

26 Equilibrium is a condition that can
A Change only if government policies change
B Change only if some internal factor changes
C Change only if some outside factor changes
D Never change

Answer: Option [B]

Equilibrium is a condition that can change only if some internal factor changes. Equilibrium constants are not changed if you change the concentrations of things present in the equilibrium. The only thing that changes an equilibrium constant is a change of temperature. The position of equilibrium is changed if you change the concentration of something present in the mixture.

27 What are the main components of basic social infrastructure of an economy?
A Industry, Trade and Transport
B Transport, Health and Banks
C Education, Industry and Agriculture
D Education, Health and Civil amenities

Answer: Option [D]

The correct answer is Education, Health and Civil amenities. Social infrastructure refers to the facilities and mechanisms that ensure education, health care, community development, income distribution, employment, and social welfare. It includes the health care system, including hospitals, the financing of health care, including health insurance, the systems for regulation and testing of medications and medical procedures; the educational and research system, including elementary and secondary schools, universities, specialised colleges, and research institutions.

28 Which one of the following taxes is collected and utilized by the State Government?
A Custom duties
B Land revenue
C Corporation tax
D Personal Income tax

Answer: Option [B]

The correct answer is Land revenue. In India taxes are collected majorly by the Central Government however there are a certain taxes which come under the purview of the State Government. Land revenue is one of them which is collected by the State and the rest are levied and collected by the Central Government.

29 Investment is equal to
A Stock of plants, machines and equipment
B Gross total of all types of physical capital assets
C Gross total of all capital assets minus wear and tear
D None of these

Answer: Option [C]

Investment is equal to Gross total of all capital assets minus wear and tear.

30 Deficit financing is an instrument of
A Tax policy
B Credit policy
C Fiscal policy
D Monetary policy

Answer: Option [C]

Deficit financing is an instrument of Fiscal policy. Deficit Financing is an instrument of fiscal policy. Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.

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