hitechpathshala

Q. 1

Redistribution policies are likely to have efficiency costs because

They will reduce the efficiency of governments

They may create disincentives to work and save

Governments have to forego taxes

They are likely to make the poor people dependent on the rich

Q. 2

Macroeconomic stabilization may be achieved through

Free market economy

Fiscal policy

Monetary policy

(b) and (c) above

Q. 3

Which of the following policies of the government fulfils the redistribution function

Parking the army on the northern borders of the country

Supply of food grains at subsidized prices to the poor people

Controlling the supply of money through monetary policy

All of the above

Q. 4

Choose the correct statement

Fiscal policy involves the use of changes in taxation and government spending while monetary policy involves the use of price and profit controls.

Fiscal policy involves the use of price and profit controls; while monetary policy involves the use of taxation and government spending.

Fiscal policy involves the use of changes in taxation and government spending; while monetary policy involves the use of changes in the supply of money and interest rates.

Fiscal policy involves the use of changes in the supply of money and interest rates; while monetary policy involves the use of changes in taxation and government spending.

Q. 5

The justification for government intervention is best described by

The need to prevent recession and inflation in the economy

The need to modify the outcomes of private market actions

The need to bring in justice in distribution of income and wealth

All the above

Q. 6

When a government offers unemployment benefits and also resorts to progressive taxation which function does it seem to fulfill?

It is trying to establish stability in an economy

It is trying to redistribute income and wealth

It is trying to allocate resources to their most efficient use

It is creating a source of market failure

Q. 7

In a federal set up, the stabilization function can be effectively performed by

Respective state governments

Ministry of taxes

The government at the centre

None of the above

Q. 8

Which of the following is concerned with division of economic responsibilities between the central and state Government of India?

NITI Aayog

central bank

Finance Commission

Parliament

Q. 9

Fiscal Federalism refers to .

Organizing and implementing development plans

Sharing of political power between centers and states

The management of fiscal policy by a nation

Division of economic functions and resources among different layers of the government

Q. 10

Which of the following is not a criterion for determining distribution of central taxes among states for 2021-26 period

Demographic performance

Forest and ecology

Infrastructure performance

Tax and fiscal efforts

Q. 11

As per the supreme court verdict in May 2022

The union has greater powers than the states for enacting GST laws

The union and state legislatures have “equal, simultaneous powers “to make laws on Goods and Services Tax

The union legislature’s enactments will prevail in case of a conflict between those of union and states

The state legislatures can make rules only with the permission of central government

Q. 12

Providing social sector services such as health and education is

the responsibility of the central government

the responsibility of the respective state governments

the responsibility of local administrative bodies

none of the above

Q. 13

Smoking in public is a case of

Negative consumption externality

Negative production externality

Internalising externality

None of the above

Q. 14

Which of the following statements is false?

Tradable permits provide incentive to innovate and reduce negative externalities

A subsidy on a good which has substantial positive externalities would reduce its cost and consequently its price would be lower

Substantial negative externalities are involved in the consumption of merit goods

Merit goods are likely to be under-produced and under consumed through the market mechanism

Q. 15

The Competition Act, 2002 aims to -

protect monopoly positions of firms that have developed unique innovations

to promote and sustain competition in markets

to determine pricing under natural monopoly.

None of the above

Q. 16

The incentive to let other people pay for a good or service, the benefits of which are enjoyed by an individual

Is a case of negative externality

Is a case of market efficiency

Is a case of free riding

Is inappropriate and warrant action

Q. 17

A government subsidy

is a market-based policy

involves the government paying part of the cost to the firms in order to promote the production of goods having positive externalities

is generally provided for merit goods

all the above

Q. 18

The production and consumption of demerit goods are

likely to be more than optimal under free markets

likely to be less than optimal under free markets

likely to be subjected to price intervention by government

a) and c) above

Q. 19

The argument for education subsidy is based on

Education is costly

the ground that education is merit good

education creates positive externalities

b) and c) above

Q. 20

The Appropriation Bill is intended to

reduce unnecessary expenditure on the part of the government

give authority to government to incur expenditure from and out of the Consolidated Fund of India

give authority to government to incur expenditure from the revenue receipts only

be passed before the budget is taken for discussion

Q. 21

Public debt management aims at

An efficient budgetary policy to avail of domestic debt facilities

Raising loans from international agencies at lower rates of interest

Raising the required amount of funding at the desired risk and cost levels

Management of public expenditure to reduce public debt

Q. 22

A budget is said to be unbalanced when

when government’s revenue exceeds government’s expenditure

when government’s expenditure exceeds government’s revenue

either budget surplus of budget deficit occurs

All the above

Q. 23

Which of the following is a statement submitted along with the budget as a requirement of FRBM Act

Annual Financial Statement

Macro -Economic Framework Statement

Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement

(b) and (c) above

Q. 24

‘Retail Direct ‘scheme is

Initiated by the Reserve Bank of India

Facilitate investment in government securities by individual investors.

Direct sale of goods and services by government departments

Both (a) and (b) are correct

Q. 25

Non-debt capital receipts

do not add to the assets of the government and therefore not treated as capital receipts

are those that do not create any future repayment burden for the government

are those that create future liabilities for the government

facilitate capital investments at low cost

Q. 26

Which of the following is a capital receipt?

Licence fee received

Sale proceeds from disinvestment

Assistance from Japan for covid vaccine

Dividend from a public sector enterprise

Q. 27

Grants given by the central government to state governments is

A revenue expenditure as it is meant to meet the current expenditure of the states

A revenue expenditure as it does neither creates any asset, nor reduces any liability of the government

A capital expenditure because it increase the capital base of the states

It is a grant and so does not come under revenue expenditure or capital expenditure.

Q. 28

Short-term credit from the Reserve Bank to state governments to bridge temporary mismatches in cash flows is known as

RBI credit to states

Commercial credit of RBI

Ways and Means Advances (WMA)

Short term facility

Q. 29

Fiscal policy refers to the

use of government spending, taxation and borrowing to influence the level of economic activity

government activities related to use of government spending for supply of essential goods

use of government spending, taxation and borrowing for reducing the fiscal deficits

and (b) above

Q. 30

If real GDP is continuously declining and the rate of unemployment in the economy is increasing, the appropriate policy should be to

Increase taxes and decrease government spending

Decrease both taxes and government spending

Decrease taxes and increase government spending

Either (a) or (c)

PUBLIC FINANCE ECO TEST 7

Marks: 30