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
1

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
2

c)Seligman

d)Musgrave

16.Classicalcanonsoftaxationarepropoundedby:
a)AdamSmith

c)Dalton

d)Keynes

b)Bastable

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
3

23.Ataxleviedat5percentonthefirstRs.10,000ofincome,10percentonthenextRs20,000
and12percentonthenextRs30,000wouldbe:
a)Progressive

b)Degressive

c)Regressive

d)Proportional

24.Whichofthefollowingtaxesisthemostlikelytoberegressive?
a)Salestaxonmobilephone

c)Importdutiesonelectronicgoods

b)ExcisedutiesonKerosene
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
4

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

c)Tradepolicy

d)Exchangeratepolicy

b)Fiscalpolicy

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
5

c)Shiftingoftaxburdenfromonepersontoanotherd)Noneofthese
39.Themodernstateis:
a)Laissezfairestate

b)Welfarestate

c)Aristocraticstate

d)Policestate

40.AccordingtoMusgravethemajorfunctionsofpublicfinanceis:
a)Allocativefunction

c)Stabilisationfunction

b)Distributivefunction
d)Alltheabove

41.WhoistheauthorofthebookTheTheoryofPublicFinance?
a)Dalton

b)R.A.Musgrave

c)A.R.Prest

d)HarveyRosen

42.Acriterionbywhichpublicgoodsaredistinguishedfromprivategoods:
a)Exclusionprinciple

c)Publicchoiceprinciple

b)Externalityprinciple
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
6

b)RelationshipbetweenGDPgrowthrateandtaxratesisUshaped
c)RelationshipbetweentaxrevenueandtaxratesisinvertedUshaped
d)RelationshipbetweensavingsrateandtaxrateisinvertedUshaped
47.Whichoneofthefollowingisnotaninstrumentoffiscalpolicy?
a)Publicrevenue

b)Publicexpenditure

c)Publicborrowing

d)CashReserveRatio

48.ThecontrollingauthorityofGovernmentexpenditureis:
a)RBI

c)MinistryofFinance

b)PlanningCommission

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

c)Abilitytopaytheory

b)Costofservicetheory

d)Noneofthese

54.WhichamongthefollowingdoescurrentlyimposeservicetaxinIndia?
a)States

b)Centre
7

c)Unionterritories

d)Allofthese

55.TheKeralaPanchayatRajActwaspassedinthelegislatureintheyear:
a)1995
c)2000

b)1994
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

c)ChairmanoftheRajyaSabha

b)PrimeMinisterofIndia

d)FinanceMinisterofIndia

60.FinanceCommissionformedinIndiaisof:
a)Politicalbody

b)Administrativebody

c)Statutorybody

d)Adhocbody

61.Theincidenceoftaxrefersto:
a)Thelevelandrateoftaxation

c)Thegrowthoftaxation

d)Thewayinwhichtaxiscollected

62.Whichtaxcannotbeshiftedtoothers?
a)Exciseduty

b)Salestax
8

b)Whoultimatelypaysthetax

c)Entertainmenttax

d)Wealthtax

63.WisemanPeacockhypothesessupportsinamuchstrongermannerthepossibilityof:
a)Anupwardtrendinpublicexpenditure

b)Adownwardtrendinpublicexpenditure

c)Aconstancyofpublicexpenditure
expenditure

d)Amixedtrendinpublic

64.Thetheoryoffiscalpolicyderivesfrom

(A)Principleofsoundfinance
(C)Welfareeconomics

(B)N.I.analysis

(D)Noneofthese

65. Themostimportantsourceofpublicrevenueis

(A)Fees

(B)Commercialrevenue

(C)Tax

(D)Fines&Penalties

66. Chairmanofthe13thFinanceCommissionis

(A)K.C.Pant

(C)PranabMukherji

(B)VijayKelkar

(D)Noneofthese

67. FiscalFederalismrefersto

(A)Sharingofpoliticalpowerbetweencentreandstates

(B)Organisingandimplementingeconomicplans

(C)DivisionofeconomicfunctionsandresourcesamongdifferentlayersofGovt.
(D)Noneofthese

68.WhichoneofthefollowingisanoptionalfunctionofGovernment?

(A)Defense

(C)LawandOrder

(B)OldAgeSecurity
(D)Noneofthese

69. Principleofsoundfinancerefersto

(A)MaximumGovernmentspending
(B)MinimumGovernmentspending
(C)Revenueexpenditurebalancedattheminimumlevel

(D)BalancebetweenTaxandspending

70. Privategoodsarecharacterizedby

(A)Applicationofexclusionprinciple
(C)Paymentofprices

(B)Rivalryinconsumption

(D)Alltheabove

71. Taxrefersto
9

(A)Compulsorycontribution
(C)Nodirectreturnforthepayment

(B)PaymentbythepeopletoGovernment
(D)Alltheabove

72.. Pumpprimingis

(A)InjectionofpurchasingpowerintothepublicthroughGovernmentspending
(B)Withdrawalofpurchasingpowerfromthepublic

(C)BalancingRevenueandExpenditure (D)Noneoftheabove

73. Meritgoodsmeans

(A)Privategoods

(C)Subsidizedprivategoods

(B)Publicgoods

(D)Noneofthese

74. Themostimportantaimoffiscalpolicyinadevelopingcountryis

(A)economicstability
(C)regionalbalance

(B)economicdevelopment
(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
10

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
11

(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
12

96. The.hadrecommendedcertainreformsonthedevolutionofGrantinAid(Plan
fund)toLsGsfrom200607to201011

(A)3rdStateFinanceCommission
FinanceCommission

(B)2rdState

(C)1rdStateFinanceCommission
above

(D)Noneofthe

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
13

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
14

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
15

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
16

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

17

18