Federal Finance System in India - General Knowledge Multiple Choice Questions and Answers | Page-4

Questions
31 A closed economy is one which
A is not a member of the U. N. O.
B does not have a coastal line
C does not trade with other countries
D does not possess any means of international transport

Answer: Option [C]

A closed economy is one which does not trade with other countries. A closed economy typically refers to a country that does not trade or engage in other financial exchanges with any other country. That means no imports come into the country and no exports leave it.

32 Operating Surplus arises in the
A Government Sector
B Enterprise Sector
C Subsistence farming
D Production for self-consumption

Answer: Option [A]

Operating Surplus arises in the Government Sector. Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA) and in corporate and government accounts. It is the balancing item of the Generation of Income Account in the UNSNA. It may be used in macro-economics as a proxy for total pre-tax profit income, although entrepreneurial income may provide a better measure of business profits.

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33 Which of the following taxes is such which does not cause rise in price?
A Sales tax
B Income tax
C Import duty
D None of the above

Answer: Option [B]

The correct answer is Income tax.

34 Who among the following has suggested tax on expenditure?
A Musgrave
B Dalton
C Kaldor
D Gautam Mathur

Answer: Option [C]

The correct answer is Kaldor. Nicholas Kaldor was British Economist who gave a report on tax reforms in eight developing countries of Asia. He had suggested an imposition of expenditure tax in india for the first time to increase the tax revenues of the government. Apart from expenditure tax, he also proposed gift tax, wealth tax and property tax.

35 Excise duty on a commodity is payable with reference to its
A Production
B Production and sale
C Production and transportation
D Production, transportation and sale

Answer: Option [A]

Excise duty on a commodity is payable with reference to its Production. An excise or excise tax (sometimes called a duty of excise special tax) is an inland tax on the sale, or production for sale, of specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties are border taxes.

36 What is Value Added Tax (VAT)?
A A new tax to be imposed on the producers of capital goods
B A simple, transparent, easy to pay tax imposed on consumers
C A single tax that replaces State taxes like, surcharge, turnover tax, etc.
D A new initiative taken by the Government to increase the tax-burden of high income groups

Answer: Option [C]

The correct answer is A single tax that replaces State taxes like, surcharge, turnover tax, etc. VAT or Value Added Tax is a type of tax that is charged by the Central Government on the sale of services and goods to the consumers. VAT is paid by the producers of services and goods, but it is finally imposed on the consumers who purchase the services and goods when they pay for it.

37 A mixed economy works primarily through the
A Market mechanism
B Central allocative machinery
C Market mechanism regulated by Government policy
D Market mechanism guided by Government participation and planning

Answer: Option [D]

A mixed economy works primarily through the Market mechanism guided by Government participation and planning. Government uses fiscal and monetary policies in order to correct the inflation and deflation in an economy.

38 ‘Golden Handshake Scheme’ is associated with
A Voluntary retirement
B Inviting foreign companies
C Establishing joint enterprises
D Private investment in public enterprises

Answer: Option [A]

‘Golden Handshake Scheme’ is associated with Voluntary retirement. A Golden Handshake Scheme is associated with voluntary retirement. It is a clause in an executive employment contract that provides the executive with a significant severance package in the case the executive loses his/her job through firing, job restructuring or even scheduled retirement.

39 According to modern thinking the law of diminishing returns applies to
A Mining
B Industry
C Agriculture
D All fields of production

Answer: Option [D]

The correct answer is All fields of production. The law of diminishing returns states that in a production process as one input variable increases is increased there will be a point at which marginal per unit output will decrease, holding all the other factors constant. According to the modern thinking , the law of diminishing returns applies to all the fields of production.

40 If the tax rate increase with the higher level of income , it shall be called
A Regressive tax
B Lump sum tax
C Progressive tax
D Proportional tax

Answer: Option [C]

If the tax rate increase with the higher level of income , it shall be called Progressive tax. Progressive tax is the taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and lower taxes from taxpayers earning less. The government uses a progressive tax mechanism.

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