Economics Quiz on Indian Fiscal System

31 The main reason for low growth rate in India, inspite of high rate of saving and capital formation is:

A High capital/output ratio

B Low capital/output ratio

C High birth rate

D Low level of foreign investment

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Answer: Option [A]

32 The situation ‘Liquidity trap’ refers to:

A Because of price rate declination people wish to hold only cash

B People want to hold only cash because there is too much of liquidity in the economy

C The rate of interest is so low that no one wants to hold interest bearing assets and people wants to hold cash

D There is an excess of foreign exchange reserves in the economy leading to excess of money supply

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Answer: Option [C]

33 The tax whose share in overall taxation revenue has gone up rapidly during the planning period is:

A Income tax

B Wealth tax

C Land revenue tax

D Tax on production

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Answer: Option [D]

34 The most appropriate measure of a country’s economic growth is the:

A Per capita real income

B Net domestic product

C Gross domestic product

D None of the above

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Answer: Option [A]

35 Value-added tax is:

A A special tax levied by states on products from other states

B Tax on final consumption collected at the consumption stage

C An ad valorem tax on final consumption collected at the manufacturing level

D An indirect tax on the domestic consumption of goods collected at all stages between production and the point of final sale

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Answer: Option [D]

36 How does the consumer benefit with VAT ?

A With the abolition of the sales tax

B As compared to other taxes, there is a less chance of tax evasion. VAT minimizes tax evasion due to its catch-up effect. It reduces the cost of production

C Due to the exemption of small businesses from the tax within certain limits prescribed by the State

D None of these

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Answer: Option [B]

37 The expenditure expensed immediately is known as:

A Revenue expenditure

B capital expenditure

C current expenditure

D None of these

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Answer: Option [A]

38 When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean ?

A The commercial banks will have more money to lend

B The commercial banks will have less money to lend

C The Reserve Bank of India will have less money to lend

D The Union Government will have less money to lend

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Answer: Option [B]

39 Economically developed countries are referred to as:

A Countries earning huge industrial profits

B Countries proficient in trade and export

C Countries having large per capita income

D Countries advanced in technology

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Answer: Option [C]

40 Usually two months advanced grants made by the house to enable the government functions to carry on until the voting of the demands for grants and passing of the General Appropriation Bill is called:

A Vote on account

B Complementary budget

C Supplementary budget

D Contingency budget

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Answer: Option [A]

Indian Fiscal System General Awareness Multiple Choice Questions and Answers | Page-4

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