MahatmaGandhiUniversity

QuestionBank

B.A.EconomicsCore6PublicEconomics
I. Choosethecorrectalphabetonly.
1.Whenexpenditureexceedstotaltaxrevenue,itiscalled:

a)Surplusbudget b)Balancedbudget

c)Deficitbudget d)Noneofthese

2.Apureprivategoodissubjectto:

a)Nonexclusion b)Exclusion

c)Lowsatisfaction d)Noneofthse

3.Whichofthefollowingisnotafiscalinstrument?

a)Openmarketoperations b)Publicexpenditure

c)Taxation d)Noneofthese

4.Anincreaseintaxratewhentaxbaseexpandsrepresents:

a)Progressivetaxation b)Regressivetaxation

c)Proportionaltaxation d)Noneofthese

5.Whichofthefollowingisameasureoffiscalpolicy?

a)Publicexpenditure b)C.R.R.

c)S.L.R. d)Bankrate

6.ThemaindifferencebetweenPublicandPrivateFinanceis:

a)Balanceofincomeexpenditure b)Coercivenessoffiscalpowertoraiseincome:

c)Dissaving d)Borrowings

7.TheFirstFinanceCommissionwasappointedintheyear:

a)1952b)1950

c)1951d)1949

8.ModernCanonsoftaxationarepropoundedby:

a)Bastableb)AdamSmith

c)Seligmond)Pigou

9.InIndia,personalincometaxisleviedonindividualsby:

a)CentralGovernmentb)StateGovernment

c)Localbodiesd)Noneofthese

10.Incometaxisbasedontheprincipleof:

a)Abilitytopayb)Willingnesstopay

c)Benefitsreceivedd)Noneofthese

11.ThePrincipleofMaximumSocialAdvantageisassociatedwith:

a)Daltonb)Pigou

c)Seligmand)Hicks

12.Whichisnotthecharacteristicofatax?

a)Importcontentb)Compulsorypayment

c)Noncompulsorypaymentd)Punishmenttotaxevader

13.Soundtaxpolicyisdevisedmainlyonthebasisof:

a)Maximumtaxrevenue b)Elastictaxbase

c)Highincomeelasticity d)Highpriceelasticity

14.Specialassessmentmeans:

a)Generaltaxonallpeopleb)Gifttax

c)Ataxforspecificbenefitconferredd)Noneofthese

15.Whoistheexponentofthelawofincreasingstateactivities?

a)Dalton b)Wagner

c)Seligman d)Musgrave

16.Classicalcanonsoftaxationarepropoundedby:

a)AdamSmith b)Bastable

c)Dalton d)Keynes

17.TheKelkarProposalsareconcernedwith:

a)Recommendationsforre4formsinthepowersector

b)Recommendationsfortaxreforms

c)Guidelinesfortheprivatizationofpublicsectorundertakings

d)Noneoftheabove

18.ValueAddedTaxis:

a)Directtax b)Indirecttax

c)Progressivetax d)Noneofthese

19.Inthecaseofdirecttax,impactandincidenceareon:

a)Differentperson b)Sameperson

c)Sellers d)Noneofthese

20.ThedirectviolationofTaxlawiscalled:

a)Tax evasion b)Taxavoidance

c)TaxRebate d)Noneofthese

21.Thefinalrestingplaceoftheburdenoftaxiscalled:

a)Taxavoidance b)Taxevasion

c)Impact d)Incidence

22.Incidenceoftaxrefersto:

a)Initialrestingplaceoftheburdenoftax b)Finalrestingplaceoftheburdenoftax

c)Both(a)and(b) d)Noneofthese

23.Ataxleviedat5percentonthefirstRs.10,000ofincome,10percentonthenextRs20,000
and12percentonthenextRs30,000wouldbe:

a)Progressive b)Degressive

c)Regressive d)Proportional

24.Whichofthefollowingtaxesisthemostlikelytoberegressive?

a)Salestaxonmobilephone b)ExcisedutiesonKerosene

c)Importdutiesonelectronicgoods d)Entrainmenttax

25.Impactoftaxrefersto:

a)Initialrestingplaceoftheburdenoftax b)Taxevasion

c)Thefinalmoneyburdenoftax d)Noneofthese

26.Fiscalpolicyisthepolicyof:

a)RBI b)NABARD

c)Government d)Alltheabove

27.Theprincipleofjudgingfiscalmeasuresbythewaytheyworkiscalled:

a)PersonalFinance b)PublicFinance

c)FunctionalFinance d)LocalFinance

28.Whenindividualswithunequaltaxpayingabilityshouldbetaxedunequallyinorderto
equalisesacrificeiscalled:

a)Horizontalequity b)VerticalEquity

c)Taxpayingability d)Noneofthese

29.Elasticrevenueresponsetomarginaltaxratereductionsiscalled:

a)Marginaltaxcurve b)Functionalcurve

c)Laffercurve d)Noneofthese

30.TheneoKeynesianapproachtopublicfinanceiscalled

a)Functionalfinance b)Aggregatedemand

c)Globalfinance d)Federalfinance

31.Thefollowingisanexampleofdirecttaxes:

a) Salestax b)Incometax

C)Estateduties d)Tolltax

32.Iftherateoftaxfallswithanincreaseinincome,itiscalled:

a)Proportionaltax b)Progressivetax

c)Regressivetax d)Noneofthese

33.WhichisthemethodoffinancialadjustmentbetweenCentreandStates?

a)Taxsharing b)Grantinaid

c)Publicdebt d)FederalFinance

34.Whosuggestedanexpendituretaxasanalternativetoincometax?

a)Musgrave b)Galbraith

c)Dalton d)Kaldor

35.Budgetisaninstrumentof:

a)Monetarypolicy b)Fiscalpolicy

c)Tradepolicy d)Exchangeratepolicy

36.Meritgoodsmeans:

a)Publicgood b)Freegood

c)Raregood d)Whitegood

37.Theconceptoffunctionalfinancewasdevelopedby:

a)J.M.Keynes b)A.P.Lerner

c)Kaldor d)Pigou

38.Shiftingrefersto:

a)Imposingtax b)Avoidingoftax

 c)Shiftingoftaxburdenfromonepersontoanotherd)Noneofthese

39.Themodernstateis:

a)Laissezfairestate b)Welfarestate

c)Aristocraticstate d)Policestate

40.AccordingtoMusgravethemajorfunctionsofpublicfinanceis:

a)Allocativefunction b)Distributivefunction

c)Stabilisationfunction d)Alltheabove

41.WhoistheauthorofthebookTheTheoryofPublicFinance?

a)Dalton b)R.A.Musgrave

c)A.R.Prest d)HarveyRosen

42.Acriterionbywhichpublicgoodsaredistinguishedfromprivategoods:

a)Exclusionprinciple b)Externalityprinciple

c)Publicchoiceprinciple d)Noneoftheabove

43.Nonrivalrayandnonexcludabilityarethecharacteristicsof:

a)Normalgoods b)Demeritgoods

c)Inferiorgoods d)Publicgoods

44.WhowasthefirsttorecommendtheadoptionofanexpendituretaxforIndia?

a)K.N.Raj b)PaulKrugman

c)RajaJ.Chelliah d)N.Kaldor

45.WhichoneofthefollowingtaxesisleviedbytheStateGovernmentonly?

a.Entertainmenttax b)Corporationtax

c)Wealttax d)Incometax

46.Laffercurvesuggestthatthe

a)RelationshipbetweentaxrevenueandtaxratesisUshaped

 b)RelationshipbetweenGDPgrowthrateandtaxratesisUshaped

c)RelationshipbetweentaxrevenueandtaxratesisinvertedUshaped

d)RelationshipbetweensavingsrateandtaxrateisinvertedUshaped

47.Whichoneofthefollowingisnotaninstrumentoffiscalpolicy?

a)Publicrevenue b)Publicexpenditure

c)Publicborrowing d)CashReserveRatio

48.ThecontrollingauthorityofGovernmentexpenditureis:

a)RBI b)PlanningCommission

c)MinistryofFinance d)FinanceCommission

49.TheideaofDemocraticDecentralizationinIndiawaspopularizedby:

a)A.D.GorwalaCommittee,1951 b)B.R.MehtaCommittee,1957

c)AshokMehtaCommittee,1978 d)Noneofthese

50.Ataxlevieduponafirmasapercentageofitsvalueadded

a)Merittax b)VAT

c)Turnovertax d)Salestax

51Aprinciplewhichstatesthatthosewhoareessentiallyequalshouldbetaxedequally

a) Verticalequity b)Benefitprinciple
C)Horizontalequity d)Abilitytopayprinciple
52.Aprogressivetaxweighsmoreheavilyuponthe
a)Poor b)Wageearners
c)Farmers d)Rich

53.Whichoneofthefollowingisthemostacceptabletheoryoftaxation:

a)Benefittheory b)Costofservicetheory
c)Abilitytopaytheory d)Noneofthese

54.WhichamongthefollowingdoescurrentlyimposeservicetaxinIndia?

a)States b)Centre

 c)Unionterritories d)Allofthese

55.TheKeralaPanchayatRajActwaspassedinthelegislatureintheyear:

a)1995 b)1994
c)2000 d)1999

56.TheconceptofdecentralizedplanningreceivedrenewedattentioninIndiawiththe:

73rdand74thConstitutionalAmendmentActsof:
a) 1993 b)1992

C)1995 d)2000

57.TheIndianincometaxis:

a)Directandproportional b)Indirectandproportional

c)Indirectandprogressive d)Directandprogressive

58.Themainobjectiveofbudgetingis:

a)Planning b)Coordination

c)Control d)Allofthese

59.WhoappointstheFinanceCommission?

a)PresidentofIndia b)PrimeMinisterofIndia

c)ChairmanoftheRajyaSabha d)FinanceMinisterofIndia

60.FinanceCommissionformedinIndiaisof:

a)Politicalbody b)Administrativebody

c)Statutorybody d)Adhocbody

61.Theincidenceoftaxrefersto:

a)Thelevelandrateoftaxation b)Whoultimatelypaysthetax

c)Thegrowthoftaxation d)Thewayinwhichtaxiscollected

62.Whichtaxcannotbeshiftedtoothers?

a)Exciseduty b)Salestax

 c)Entertainmenttax d)Wealthtax

63.WisemanPeacockhypothesessupportsinamuchstrongermannerthepossibilityof:

a)Anupwardtrendinpublicexpenditure b)Adownwardtrendinpublicexpenditure

c)Aconstancyofpublicexpenditure d)Amixedtrendinpublic
expenditure

64.Thetheoryoffiscalpolicyderivesfrom
(A)Principleofsoundfinance (B)N.I.analysis
(C)Welfareeconomics (D)Noneofthese
65. Themostimportantsourceofpublicrevenueis
(A)Fees (B)Commercialrevenue
(C)Tax (D)Fines&Penalties
66. Chairmanofthe13thFinanceCommissionis
(A)K.C.Pant (B)VijayKelkar
(C)PranabMukherji (D)Noneofthese
67. FiscalFederalismrefersto
(A)Sharingofpoliticalpowerbetweencentreandstates
(B)Organisingandimplementingeconomicplans
(C)DivisionofeconomicfunctionsandresourcesamongdifferentlayersofGovt.
(D)Noneofthese
68.WhichoneofthefollowingisanoptionalfunctionofGovernment?
(A)Defense (B)OldAgeSecurity
(C)LawandOrder (D)Noneofthese
69. Principleofsoundfinancerefersto
(A)MaximumGovernmentspending (B)MinimumGovernmentspending
(C)Revenueexpenditurebalancedattheminimumlevel
(D)BalancebetweenTaxandspending
70. Privategoodsarecharacterizedby
(A)Applicationofexclusionprinciple (B)Rivalryinconsumption
(C)Paymentofprices (D)Alltheabove
71. Taxrefersto

 (A)Compulsorycontribution (B)PaymentbythepeopletoGovernment
(C)Nodirectreturnforthepayment (D)Alltheabove
72.. Pumpprimingis
(A)InjectionofpurchasingpowerintothepublicthroughGovernmentspending
(B)Withdrawalofpurchasingpowerfromthepublic
(C)BalancingRevenueandExpenditure (D)Noneoftheabove
73. Meritgoodsmeans
(A)Privategoods (B)Publicgoods
(C)Subsidizedprivategoods (D)Noneofthese
74. Themostimportantaimoffiscalpolicyinadevelopingcountryis
(A)economicstability (B)economicdevelopment
(C)regionalbalance (D)Noneofthese
75. Marketfailurereferstoasituationwhen
(A)Marketdoesnotfunction(B)marketsolutionoccursifgovernment
intervenes
(C)Socialefficiencyisnotachieved(D)perfectlycompetitivefirmexperiencesP>MC
76. Publichoodsarenonrivialif
(A)Somepeoplecannotbepreventedfromconsumingit
(B)Consumptionbyonepersonreducesconsumptionofotherindividuals
(C)Somepeopleareexcludedfromconsumingit
(D)alltheabove
77. Theincomeofthegovernmentthroughallitssourcesiscalled
(A)Publicexpenditure (B)publicrevenue
(C)Publicfinance (D)noneofthese
78. Whichofthefollowingareindirecttaxes?
(A)Customsduties (B)Exciseduties
(C)Salestax (D)alltheabove
79. TheFinanceCommissionisappointedinevery
(A)3year (B)4year
(C)5year (D)6year
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80. Themaximumeffectofdirecttaxesison
(A)Priceoffood (B)Income
(C)Capitalgoods (D)consumergoods
81. TheWanchooCommittee(1971)probedinto
(A)Directtaxes (B)indirecttaxes
(C)Agriculturalholdingtax (D)nontaxrevenue
82. Deficitfinancingmeans
(A)Publicexpenditureinexcessofpublicrevenue
(B)Publicrevenueinexcessofpublicexpenditure
(C)Both(A)and(B)
(D)noneoftheabove
83. Modvatmeans
(A)Modifiedvalueaddedtax (B)moderatevalueaddedtax
(C)Modestvalueaddedtax (D)modernvalueaddedtax
84. TherevenueoftheStateGovernmentisraisedfromthefollowingsourcesexceptone,
whichisthat?
(A)Landrevenue (B)agriculturalincometax
(C)Entertainmenttax (D)expendituretax
85. TheFinanceCommissiondoesallthefollowingfunctionsexceptone,whichisthat?
(A)Worksoutallocationoftaxesinthedivisiblepool
(B)LooksintofinancialrelationsbetweentheCentreandtheStates
(C)AllocatesgrantsinaidtotheStatesandUnionTerritories
(D)AssistthePlanningCommissioninmaking5yearplans.
86. Themethodsofrestoringresourcebalancebetweendifferentgovernmentsinafederal
setup
isbasedon
(A)Taxsharing (B)GrantsinAid
(C)Loans (D)Alltheabove
87. FinanceCommissiondetermines

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 (A)ThefinancesofGovernmentofIndia(B)Theresourcestransferto
theState
(C)Theresourcestransfertothevariousdepartments(D)noneoftheabove
88. FederalFinancedealswith
(A)Statefinances (B)Financesofrailways
(C)Localbodies (D)CentreStatefinancialrelations
9. ThenameoftheChairmanofthe11thFinanceCommission
(A)K.C.Pant (B)A.M.Kushro
(C)R.J.Chelliah (D)N.K.P.Salve
90. Primarydeficitmeans:
(A)FiscaldeficitInterest (B)Revenuedeficitinterestpayments
(C)Fiscaldeficit+revenuedeficit d)Budgetarydeficit
91. NonPlanGrantsaredeterminedby
(A)PlanningCommission (B)FinanceCommission
(C)CentralGovernment (D)StateGovernment
92. PublicDebtManagementrefersto
(A)Termsofnewbonds (B)Proportionofdifferentcomponentsofpublicdebt
(C)Maturity (D)Alltheabove
93. PublicExpenditureincreases
(A)Interestrate (B)Employment
(C)Exports (D)Imports
94. CentralAssistanceforStateandUTplanisapartof
(A)PlanExpenditure (B)RevenueExpenditure
(C)NonPlanExpenditure (D)Noneoftheabove
95. Defictfinancingincludes
a)BorrowingfromtheCentralBank
b)IssuesofnewcurrencybytheGovernment
C)Withdrawalofpastaccumulatedcashbalancebythegovernment
d)Alltheabove

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96. The.hadrecommendedcertainreformsonthedevolutionofGrantinAid(Plan
fund)toLsGsfrom200607to201011
(A)3rdStateFinanceCommission (B)2rdState
FinanceCommission
(C)1rdStateFinanceCommission (D)Noneofthe
above
97. Thereisaviewthatreducedratesonincometaxwouldleadtoasignificantriseinincome
taxrevenue.Thisviewhasbeenattributedto
(A)HerbertSimon (B)ArthurLaffer
(C)RobertLucas (D)J.B.Say
98. FunctionalFinancefunctionsthrough
(A)Buyingandselling (B)givingandtaking
(C)Lendingandborrowing (D)Alltheabove
99. TheidealsystemofpublicFinanceisonewherethenetbenefitis
(A)Maximum (B)Minimum
(C)Zero (D)Infinity
100. TheprincipleofMaximumSocialAdvantageisconnectedwith
(A)Taxation (B)Expenditure
(C)PublicDebt (D)Both(A)and(B)

AnswerKey

1.CDeficitBudget
2.bExclusion

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3.aopenmarketoperations
4.aprogressivetaxation
6.abalanceofincomeexpenditure
7.c1951
8.bAdamSmith
9.aCentralGovernment
10.aAbilitytopay
11.aDalton
12.cNoncompulsorypayment
13.amaximumtaxrevenue
14.cataxforspecificbenefitconferred
15.bWagner
16.aAdamSmith
17.brecommendationsfortaxreforms
18.bindirecttax
19.bsameperson
20.ataxevasion
21.dincidence
22.bfinalrestingplaceoftheburdenoftax
23.aprogressive
24.bexpendituresonKerosene
25.ainitialrestingplaceoftheburdenoftax
26.cGovernment
27.cfunctionalfinance
28.cLaffercurve
30.aFunctionalfinance
31.bIncometax
32.cregressivetax
33.ataxsharing
34.dKaldor

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35.bfiscalpolicy
36.apublicgood
37.bA.P.Learner
38.cshiftingoftaxburdenfromonepersontoanother
39.bwelfarestate
40.dalltheabove
41.bR.A.Musgrave
42.aexclusionprinciple
43.dpublicgoods
44.dKaldor
45.aentertainemnttax
46.arelationshipbetweentaxrevenueandtaxratesisUshaped
47.dCashReserveRatio
48.cMinistryofFinance
49.cAshokMehtaCommittee,1978
50.bVAT
51.bBenefitprinciple
52.dRich
53.cAbilitytopaytheory
54.bCentre
55.b1994
56.b1992
57.dDirectandprogressive
58.dAlltheabove
59.aPresidentofIndia
60.cstatutorybody
61.bwhoultimatelypaysthetax
62.centertainmenttax
63.aanupwardtrendinpublicexpenditure
64.aprincipleofsoundfinance

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65.ctax
66.bVijayKelkar
67.cdivisionofeconomicfunctionsandresourcesamongdifferentlayersofGovernemnt
68.boldagesecurity
69.crevenueexpenditurebalancedattheminimumlevel\70.Dalltheabove
70.dalltheabove
71.bpaymentbythepeopletoGovernment
72.ainjectionofpurchasingpowertothepublicthroughGovernmentspending
73.bpublicgoods
74.beconomicdevelopment
75.csocialefficiency
76.asomepeoplecannotbepreventedfromconsumingit
77.bpublicrevenue
78.dalltheabove
79.c5year
80.bincome
81.adirecttaxes
82.apublicexpenditureinexcessofpublicrevenue
83.amodifiedvalueaddedtax
84.dexpendituretax
85.dassistthePlanningCommissioninmaking5yearplans
86.dalltheabove
87.btheresourcestransfertothestate
88.dCentreStateFinancialRelations
89.bA.M.Kushro
90.aFiscaldeficitinterest
91.cCentralGovernment
92.dalltheabove
93.bemployment
94.cNonplanexpenditure

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95.dalltheabove
96.a3rdStateFinanceCommission
97.bArtherLaffer
98.dalltheabove
99.aMaximum
100.bExpenditure

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