Deck 1: Public Finance and Taxation Policy

Question 1

When expenditure exceeds total tax revenue, it is called:

A)surplus budget
B)balanced budget
C)deficit budget
D)none of these

Answer 1

deficit budget

Question 2

A pure private good is subject to:

A)non exclusion
B)exclusion
C)low satisfaction
D)none of thse

Answer 2

exclusion

Question 3

Which of the following is not a fiscal instrument?

A)open market operations
B)public expenditure
C)taxation
D)none of these

Answer 3

open market operations

Question 4

An increase in tax rate when tax base expands represents:

A)progressive taxation
B)regressive taxation
C)proportional taxation
D)none of these

Question 5

The main difference between Public and Private Finance is:

A)balance of income?expenditure
B)coerciveness of fiscal power to raise income:
C)dissaving
D)borrowings

Question 6

The name of the Chairman of the 11th Finance Commission

A)k.c. pant
B)a.m. kushro
C)r. j. chelliah
D)n.k.p. salve

Question 7

Income tax is based on the principle of:

A)ability to pay
B)willingness to pay
C)benefits received
D)none of these

Question 8

The Principle of Maximum Social Advantage is associated with:

A)dalton
B)pigou
C)seligman
D)hicks

Question 9

Which is not the characteristic of a tax?

A)import content
B)compulsory payment
C)non -compulsory payment
D)punishment to tax evader

Question 10

Special assessment means:

A)general tax on all people
B)gift tax
C)a tax for specific benefit conferred
D)none of these

Question 11

Classical canons of taxation are propounded by:

A)adam smith
B)bastable
C)dalton
D)keynes

Question 12

The Kelkar Proposals are concerned with:

A)recommendations for re4forms in the power sector
B)recommendations for tax reforms
C)guidelines for the privatization of public sector undertakings
D)none of the above

Question 13

Value Added Tax is:

A)direct tax
B)indirect tax
C)progressive tax
D)none of these

Question 14

In the case of direct tax, impact and incidence are on:

A)different person
B)same person
C)sellers
D)none of these

Question 15

The direct violation of Tax law is called:

A)tax evasion
B)tax avoidance
C)tax rebate
D)none of these

Question 16

The final resting place of the burden of tax is called:

A)tax avoidance
B)tax evasion
C)impact
D)incidence

Question 17

Incidence of tax refers to:

A)initial resting place of the burden of tax
B)final resting place of the burden of tax
C)both (a) and (b)
D)none of these

Question 18

A tax levied at 5 percent on the first Rs. 10,000 of income, 10 percent on the next Rs 20,000 and 12 percent on the next Rs 30,000 would be:

A)progressive
B)degressive
C)regressive
D)proportional

Question 19

Which of the following taxes is the most likely to be regressive?

A)sales tax on mobile phone
B)excise duties on kerosene
C)import duties on electronic goods
D)entrainment tax

Question 20

Impact of tax refers to:

A)initial resting place of the burden of tax
B)tax evasion
C)the final money burden of tax
D)none of these

Question 21

Fiscal policy is the policy of:

A)rbi
B)nabard
C)government
D)all the above

Question 22

The principle of judging fiscal measures by the way they work is called:

A)personal finance
B)public finance
C)functional finance
D)local finance

Question 23

When individuals with unequal tax paying ability should be taxed unequally in order to equalise sacrifice is called:

A)horizontal equity
B)vertical equity
C)tax paying ability
D)none of these

Question 24

The following is an example of direct taxes:

A)sales tax
B)income tax
C)estate duties
D)toll tax

Question 25

If the rate of tax falls with an increase in income, it is called:

A)proportional tax
B)progressive tax
C)regressive tax
D)none of these

Question 26

Which is the method of financial adjustment between Centre and States?

A)tax sharing
B)grant?in?aid
C)public debt
D)federal finance

Question 27

Who suggested an expenditure tax as an alternative to income tax?

A)musgrave
B)galbraith
C)dalton
D)kaldor

Question 28

Budget is an instrument of:

A)monetary policy
B)fiscal policy
C)trade policy
D)exchange rate policy

Question 29

The concept of functional finance was developed by:

A)j.m. keynes
B)a.p. lerner
C)kaldor
D)pigou

Question 30

The modern state is:

A)laissez -faire state
B)welfare state
C)aristocratic state
D)police state

Question 31

According to Musgrave the major functions of public finance is:

A)allocative function
B)distributive function
C)stabilisation function
D)all the above

Question 32

Who is the author of the book "The Theory of Public Finance"?

A)dalton
B)r.a. musgrave
C)a.r. prest
D)harvey rosen

Question 33

A criterion by which public goods are distinguished from private goods:

A)exclusion principle
B)externality principle
C)public choice principle
D)none of the above

Question 34

Who was the first to recommend the adoption of an expenditure tax for India?

A)k.n. raj
B)paul krugman
C)raja j. chelliah
D)n. kaldor

Question 35

The controlling authority of Government expenditure is:

A)rbi
B)planning commission
C)ministry of finance
D)finance commission

Question 36

The idea of 'Democratic Decentralization' in India was popularized by:

A)a.d. gorwala committee, 1951
B)b.r. mehta committee, 1957
C)ashok mehta committee, 1978
D)none of these

Question 37

Which one of the following is the most acceptable theory of taxation:

A)benefit theory
B)cost of service theory
C)ability to pay theory
D)none of these

Question 38

The incidence of tax refers to:

A)the level and rate of taxation
B)who ultimately pays the tax
C)the growth of taxation
D)the way in which tax is collected

Question 39

The theory of fiscal policy derives from

A)principle of sound finance
B)n.i. analysis
C)welfare economics
D)none of these

Question 40

The most important source of public revenue is

A)fees
B)commercial revenue
C)tax
D)fines & penalties

Question 41

Fiscal Federalism refers to

A)sharing of political power between centre and states
B)organising and implementing economic plans
C)division of economic functions and resources among different layers of govt.
D)none of these

Question 42

Which one of the following is an optional function of Government?

A)defense
B)old age security
C)law and order
D)none of these

Question 43

Principle of sound finance refers to

A)maximum government spending
B)minimum government spending
C)revenue expenditure balanced at the minimum level
D)balance between tax and spending

Question 44

Private goods are characterized by

A)application of exclusion principle
B)rivalry in consumption
C)payment of prices
D)all the above

Question 45

Tax refers to

A)compulsory contribution
B)payment by the people to government
C)no direct return for the payment
D)all the above

Question 46

. Pump priming is

A)injection of purchasing power into the public through government spending
B)withdrawal of purchasing power from the public
C)balancing revenue and expenditure
D)none of the above

Question 47

Merit goods means

A)private goods
B)public goods
C)subsidized private goods
D)none of these

Question 48

The most important aim of fiscal policy in a developing country is

A)economic stability
B)economic development
C)regional balance
D)none of these

Question 49

The income of the government through all its sources is called

A)public expenditure
B)public revenue
C)public finance
D)none of these

Question 50

Which of the following are indirect taxes?

A)customs duties
B)excise duties
C)sales tax
D)all the above

Question 51

The Finance Commission is appointed in every

A)3 year
B)4 year
C)5 year
D)6 year

Question 52

The maximum effect of direct taxes is on

A)price of food
B)income
C)capital goods
D)consumer goods

Question 53

The Wanchoo Committee (1971) probed into

A)direct taxes
B)indirect taxes
C)agricultural holding tax
D)non?tax revenue

Question 54

Modvat means

A)modified value added tax
B)moderate value added tax
C)modest value added tax
D)modern value added tax

Question 55

The revenue of the State Government is raised from the following sources except one, which is that?

A)land revenue
B)agricultural income tax
C)entertainment tax
D)expenditure tax

Question 56

The Finance Commission does all the following functions except one, which is that?

A)works out allocation of taxes in the divisible pool
B)looks into financial relations between the centre and the states
C)allocates grants ? in - aid to the states and union territories
D)assist the planning commission in making 5 year plans.

Question 57

Primary deficit means:

A)fiscal deficit? interest
B)revenue deficit?interest payments
C)fiscal deficit+ revenue deficit
D)budgetary deficit

Question 58

Non?Plan Grants are determined by

A)planning commission
B)finance commission
C)central government
D)state government

Question 59

Public Debt Management refers to

A)terms of new bonds
B)proportion of different components of public debt
C)maturity
D)all the above

Question 60

Public Expenditure increases

A)interest rate
B)employment
C)exports
D)imports

Question 61

Central Assistance for State and UT plan is a part of

A)plan expenditure
B)revenue expenditure
C)non?plan expenditure
D)none of the above

Question 62

There is a view that reduced rates on income tax would lead to a significant rise in income tax revenue. This view has been attributed to

A)herbert simon
B)arthur laffer
C)robert lucas
D)j.b. say

Question 63

Functional Finance functions through

A)buying and selling
B)giving and taking
C)lending and borrowing
D)all the above

Question 64

The ideal system of public Finance is one where the net benefit is

A)maximum
B)minimum
C)zero
D)infinity

Question 65

The principle of Maximum Social Advantage is connected with

A)taxation
B)expenditure
C)public debt
D)both (a) and (b)

Question 66

Economic functions of the government are all the following EXCEPT to .

A)Control the price level of public goods.
B)Create a stable economic environment.
C)Increase the level of education.
D)Distribute income and wealth.

Question 67

Which of the following does NOT determine the nature of Public Economics?

A)Public economics studies the government and how its policies affect the economy.
B)Public economics is the study of government policy through the lens of economic efficiency and equity.
C)Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social
D)Public Economics studies the behaviour of private firms and is called economics of Priavte Sector.

Question 68

The Fundamental Theorem of Welfare Economics:

A)Shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
B)Refers to the biblical observation that "the poor ye shall always have with you."
C)Implies that no intervention in the workings of markets can be justified on efficiency grounds.
D)Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.

Question 69

If the economy is in an inflationary period, what action would Fiscal Policy most likely take?

A)Decrease the discount rate.
B)Increase taxes.
C)Decrease taxes.
D)Increase spending.

Question 70

Merit goods are those which, when consumed, generate positive external benefits. This is likely to mean that, in a free market economy, the good will be:

A)Over-consumed.
B)Over-supplied.
C)Subject to VAT.
D)Under-supplied.

Question 71

The optimum level of economic activity and associated pollution from society's point of view occurs where:

A)Marginal private benefit = Marginal private cost.
B)Marginal social benefit < Marginal social cost.
C)Marginal social benefit = Marginal social cost.
D)Marginal social benefit > Marginal social cost.

Question 72

If pollution by one firm results in higher production costs for another firm, this would be classified as a:

A)Negative production externality.
B)Negative consumption externality.
C)Marginal private cost of production.
D)Free Good.

Question 73

Printing of new currency notes and RBI borrowings by government is called:

A)Government Loans.
B)Government Securities.
C)Government Bonds.
D)Deficit Financing.

Question 74

Which of the following is not a characteristic of a tax?

A)It is a compulsory payment.
B)Every tax involves a sacrifice by tax payer.
C)There is a quid-pro-quo between the tax payer and the Government.
D)Refusal to pay tax is a punishable offence.

Question 75

Which of the following is not the broad component of Property Rights?

A)The right to use the good.
B)The right not to transfer the good to others.
C)The right to earn income from the good.
D)The right to enforce property rights.

Question 76

When property rights are settled by means of bargaining or negotiating terms, what has been applied?

A)A good deal.
B)A bad deal.
C)Cloud theorem.
D)Coase theorem.

Question 77

Following are some of examples of Transfer Expenditure EXCEPT:

A)Interest payments on public debt.
B)Social infrastructure such as education, health and family welfare.
C)Unemployment allowances.
D)Subsidies.

Question 78

All other things being equal, a substantial cut in the rate of income tax in the short run is most likely to reduce:

A)The government budget deficit.
B)Spending on imports.
C)Unemployment.
D)Inflation.

Question 79

Which of the following is NOT the effect of taxation on production?

A)Effects on the distribution of income and wealth.
B)Effects on the ability to work, save and invest.
C)Effects on the will to work, save and invest.
D)Effects on the allocation of resources.

Question 80

A tax either on consumers or on producers:

A)Creates a loss only to consumers.
B)Creates a loss only to producers.
C)Creates a net gain for the society as a whole.
D)Creates a dead weight loss for society as a whole.