Chapter:

170+ Fiscal System of India Solved MCQs

in Indian Economy

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration (BBA) , Bachelor of Arts (BA) , Bachelor of Arts in Economics (BA Economics) , Union Public Service Commission (UPSC) .

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51.	India's progress has been reasonably satisfactory in connection with:
A.	growth of per capita income
B.	reduction in inequalities
C.	reduction of unemployment
D.	growth of GNP
Answer» D. growth of GNP

52.	Among Indian Economists who had done pioneering work on National Income ?
A.	P. N. Dhar
B.	Jagdish Bhagwati
C.	V. K. R.V. Rao
D.	Prof. Shenoi
Answer» C. V. K. R.V. Rao

53.	Who was the chairman of National Income Committee?
A.	P. C. Mahalanobis
B.	V.K.R.V. Rao
C.	D.R. Gadgil
D.	A.M. Khusro
Answer» A. P. C. Mahalanobis

54.	The recommendations of the Finance Commission are:
A.	binding on the government
B.	not binding on the government
C.	generally accepted as a matter of convention
D.	accepted or rejected by the government according to its convenience
Answer» D. accepted or rejected by the government according to its convenience

55.	After 1991, the Central Government implemented various far-reaching reforms in the area of taxation. This was based on the recommendations of the: [CDS 1999]
A.	Wanchoo Committee
B.	Rajah Chelliah Committee
C.	Raj Committee
D.	Narsimhan Committee
Answer» B. Rajah Chelliah Committee

56.	To know whether the rich are getting richer and the poor getting poorer, it is necessary to compare; [IAS 1994]
A.	the availability of foodgrains among two sets of people, one rich and the other poor, over different periods of time
B.	the distribution of income of an identical set of income recipients in different periods of time
C.	the wholesale price index over different periods of time for different regions
D.	the distribution of income of different sets of income recipients at a point of time
Answer» B. the distribution of income of an identical set of income recipients in different periods of time

57.	National income of India is compiled by:
A.	Finance Commission
B.	Indian Statistical Institute
C.	National Development Council
D.	Central Statistical Organisation
Answer» D. Central Statistical Organisation

58.	Which one of the following is the correct statements? Service tax is a/an [IAS 2006]
A.	direct tax levied by the Central Government
B.	indirect tax levied by the Central Government
C.	direct tax levied by the State Government
D.	indirect tax levied by the State Government
Answer» B. indirect tax levied by the Central Government

59.	If saving exceeds investment, the national income will :
A.	fall
B.	rise
C.	fluctuate
D.	remain constant
Answer» D. remain constant

60.	Which of the following are the main causes of slow rate of growth of per capita income in India? [IAS 1993] 1. High capital-output ratio 2. High rate of growth of population 3. High rate of capital formation 4. High level of fiscal deficits
A.	1 and 2
B.	2, 3 and 4
C.	1 and 4
D.	1, 2, and 4
Answer» A. 1 and 2

61.	Which of the following is not part of state tax?
A.	Land revenue
B.	Entertainment tax
C.	Sales and purchase of newspapers
D.	Stamp duty other than financial documents
Answer» C. Sales and purchase of newspapers

62.	VAT is alternate of:
A.	state tax
B.	central tax
C.	both (a) and (b)
D.	neither (a) nor (b)
Answer» B. central tax

63.	Which of the following is not a direct tax?
A.	Tax on income
B.	Tax on wealth
C.	Tax on expenditure
D.	Tax on entertainment
Answer» D. Tax on entertainment

64.	In economic terms, which of the following factors determine the 'Individual's demand' of a product/commodity? [RBI Grade B Officer 2011] A. Price of a commodity B. Income of the individual C. Utility and quality of a commodity
A.	Only A
B.	Only B
C.	Only C
D.	All A, B, & C
Answer» D. All A, B, & C

65.	Share of Direct tax in post economic reform is:
A.	increasing
B.	decreasing
C.	can't say anything
D.	fluctuating
Answer» A. increasing

66.	Many times we see in financial journals/bulletins a term M3. What is M3? [RBI Grade B Officer 2011]
A.	Currency in circulation on a particular day
B.	Total value of foreign exchange on a particular day
C.	Total value of export credit on a given date
D.	None of these
Answer» D. None of these

67.	Consider the following statements: In India, stamp duties on financial transactions are: 1. levied and collected by the State Government 2. appropriated by the Union Government Which of the statements is/are correct?
A.	Only 1
B.	Only 2
C.	Both 1 and 2
D.	Neither 1 nor 2
Answer» D. Neither 1 nor 2

68.	Tax collection of Central govt. was lowest as compare to G.D.P., in which of the following year?
A.	1999-2000
B.	2000-2001
C.	2001-2002
D.	2002-2003
Answer» A. 1999-2000

69.	In India GDP is higher than GNP because country's:
A.	import > export
B.	capital inflow > capital outflow
C.	net factor income is negative
D.	Govt. expenditure is more than it's income
Answer» A. import > export

70.	In India, the service tax was first introduced in the year: [CDS 2001]
A.	1998
B.	1996
C.	1994
D.	1992
Answer» C. 1994

71.	In gross domestic saving by sector of origin, the four sectors in order of importance are:
A.	Household Sector, Public Enterprises, Government Sector, Corporate Sector
B.	Household Sector, Corporate Sector, Government Sector, Public Enterprises
C.	Government Sector, Household Sector, Public Enterprises, Corporate Sector
D.	Household Sector, Government Sector, Public Enterprises, Corporate Sector
Answer» B. Household Sector, Corporate Sector, Government Sector, Public Enterprises

72.	The main reason for low growth rate in India, inspite of high rate of savings and capital formation is: [IAS 1995]
A.	high birth rate
B.	low level of foreign aid
C.	low capital/output ratio
D.	high capital/output ratio
Answer» C. low capital/output ratio

73.	Which among the following sectors received the largest Central plan outlay in the last few Central Government annual budgets? [CDS 2002]
A.	Energy
B.	Agriculture and allied activities
C.	Social Services
D.	Communication
Answer» A. Energy

74.	After the initiation of economic reforms in 1991-92 the percentage share of: [CDS 1999]
A.	direct taxes increased and that of indirect taxes decreased in gross tax revenue
B.	Both direct and indirect taxes increased in gross tax revenue
C.	both direct and indirect taxes decreased in gross tax revenue
D.	direct taxes decreased and that of indirect taxes increased in gross tax revenue
Answer» B. Both direct and indirect taxes increased in gross tax revenue

75.	Which of the following statements about indirect taxes in India is/are true? 1. Yield from indirect taxes is much more than that from direct taxes 2. Indirect taxes have grown faster than direct taxes since independence 3. Indirect taxes are ultimately paid for by persons who do not actually pay the taxes to the Government 4. Increase in indirect taxes is a welcome feature in a developing country
A.	1, 2 and 4
B.	1 and 2
C.	2 only
D.	1, 2 and 3
Answer» D. 1, 2 and 3

170+ Fiscal System of India Solved MCQs

India's progress has been reasonably satisfactory in connection with:

Among Indian Economists who had done pioneering work on National Income ?

Who was the chairman of National Income Committee?

The recommendations of the Finance Commission are:

After 1991, the Central Government implemented various far-reaching reforms in the area of taxation. This was based on the recommendations of the: [CDS 1999]

To know whether the rich are getting richer and the poor getting poorer, it is necessary to compare; [IAS 1994]

National income of India is compiled by:

Which one of the following is the correct statements? Service tax is a/an [IAS 2006]

If saving exceeds investment, the national income will :

Which of the following are the main causes of slow rate of growth of per capita income in India? [IAS 1993] 1. High capital-output ratio 2. High rate of growth of population 3. High rate of capital formation 4. High level of fiscal deficits

Which of the following is not part of state tax?

VAT is alternate of:

Which of the following is not a direct tax?

In economic terms, which of the following factors determine the 'Individual's demand' of a product/commodity? [RBI Grade B Officer 2011] A. Price of a commodity B. Income of the individual C. Utility and quality of a commodity

Share of Direct tax in post economic reform is:

Many times we see in financial journals/bulletins a term M3. What is M3? [RBI Grade B Officer 2011]

Consider the following statements: In India, stamp duties on financial transactions are: 1. levied and collected by the State Government 2. appropriated by the Union Government Which of the statements is/are correct?

Tax collection of Central govt. was lowest as compare to G.D.P., in which of the following year?

In India GDP is higher than GNP because country's:

In India, the service tax was first introduced in the year: [CDS 2001]

In gross domestic saving by sector of origin, the four sectors in order of importance are:

The main reason for low growth rate in India, inspite of high rate of savings and capital formation is: [IAS 1995]

Which among the following sectors received the largest Central plan outlay in the last few Central Government annual budgets? [CDS 2002]

After the initiation of economic reforms in 1991-92 the percentage share of: [CDS 1999]

Which of the following is not an indirect tax?

Which of the following is not a direct tax?

All taxes come under:

Estimation of national income in India is difficult due to : I. illiteracy of people II. non-monetised consumption III. inflation IV. people holding multiple jobs

The annual financial statement shows the receipts and payments of the government under the 3 parts in which government accounts are kept in : 1. Consolidated Fund 2. Contingency Fund 3. Public Account Which of the following items are covered under the Public Account?

'Liquidity trap' is a situation in which:

Consider the following: 1. Market Borrowing 2. Treasury Bills 3. Special Securities to the RBI Which of these is/are components of internal debt of the government?

The RBI uses the following instruments for quantitative central of credit: (i) Cash Reserve Ratio (ii) Bank Rate (iii) Open Market Operations (iv) Margin Requirements Choose your answer from:

Consider the following taxes: 1. Corporation Tax 2. Value Added Tax 3. Wealth Tax 4. Import duty Which of these is/are Indirect taxes?

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

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

When the ratio of indirect taxes to total taxation revenue is very high, it leads to : 1. rise in the price level 2. higher taxation burden on the rich 3. higher taxation burden on the poor 4. fall in tax revenues

CENVAT is associated with:

Taxation and the government's expenditure policy are dealt under the :

Deficit financing leads to inflation in general, but it can be checked if:

Value-added tax is :

What is the main source of revenue to meet different expenditures?

Which one of the following statements regarding the levying, collecting and distribution of Income Tax is correct? [IAS 1999]

What are “Open Market Operations" ? [SSC Graduate 2003]

Which of the following is poorest state in India?

The 'gilt-edged' market deals in : [UP PCS 2002]

How does the consumer benefit with VAT? [CPO SI 2003]

Investment in public works is known as :

Which of the following are the main causes of slow rate of growth of per capita income in India? [IAS 1993]
1. High capital-output ratio
2. High rate of growth of population
3. High rate of capital formation
4. High level of fiscal deficits

In economic terms, which of the following factors determine the 'Individual's demand' of a product/commodity? [RBI Grade B Officer 2011]
A. Price of a commodity
B. Income of the individual
C. Utility and quality of a commodity

Consider the following statements: In India, stamp duties on financial transactions are:
1. levied and collected by the State Government
2. appropriated by the Union Government
Which of the statements is/are correct?

Estimation of national income in India is difficult due to :
I. illiteracy of people
II. non-monetised consumption
III. inflation
IV. people holding multiple jobs

Consider the following:
1. Market Borrowing
2. Treasury Bills
3. Special Securities to the RBI
Which of these is/are components of internal debt of the government?

Consider the following taxes:
1. Corporation Tax
2. Value Added Tax
3. Wealth Tax
4. Import duty
Which of these is/are Indirect taxes?

When the ratio of indirect taxes to total taxation revenue is very high, it leads to :
1. rise in the price level
2. higher taxation burden on the rich
3. higher taxation burden on the poor
4. fall in tax revenues

76.	Which of the following is not an indirect tax?
A.	Land revenue
B.	Customs duties
C.	Entertainment tax
D.	Sales tax
Answer» A. Land revenue

77.	Which of the following is not a direct tax?
A.	Estate tax
B.	Sales tax
C.	Corporation tax
D.	Wealth tax
Answer» B. Sales tax

78.	All taxes come under:
A.	revenue receipts
B.	capital receipts
C.	public debt
D.	both (a) and (b)
Answer» A. revenue receipts

79.	Estimation of national income in India is difficult due to : I. illiteracy of people II. non-monetised consumption III. inflation IV. people holding multiple jobs
A.	I, II, III and IV
B.	II and III
C.	I and IV
D.	I, II and IV
Answer» D. I, II and IV

80.	The annual financial statement shows the receipts and payments of the government under the 3 parts in which government accounts are kept in : 1. Consolidated Fund 2. Contingency Fund 3. Public Account Which of the following items are covered under the Public Account?
A.	All revenue received by the government
B.	Loans raised by the government
C.	Funds placed at the disposal of the President
D.	Transactions relating to provident fund, small savings, etc.
Answer» D. Transactions relating to provident fund, small savings, etc.

81.	'Liquidity trap' is a situation in which:
A.	people want to hold only cash because prices are falling everyday
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 foregin exchange reserves in the economy leading to excess of money supply
Answer» C. the rate of interest is so low that no one wants to hold interest bearing assets and people wants to hold cash

82.	Consider the following: 1. Market Borrowing 2. Treasury Bills 3. Special Securities to the RBI Which of these is/are components of internal debt of the government?
A.	1 only
B.	1 and 2
C.	1 and 3
D.	1, 2 and 3
Answer» D. 1, 2 and 3

83.	The RBI uses the following instruments for quantitative central of credit: (i) Cash Reserve Ratio (ii) Bank Rate (iii) Open Market Operations (iv) Margin Requirements Choose your answer from:
A.	(i) and (ii)
B.	(ii) and (iv)
C.	(i), (ii) and (iii)
D.	(i), (ii), (iii) and (iv)
Answer» C. (i), (ii) and (iii)

84.	MODVAT is different from VAT in the sense that: 1. under MODVAT, tax is levied only on value addition while under VAT, excise is imposed on final value and then rebate is given on inputs 2. MODVAT is only at the production stage while VAT extends both to production and distribution stage 3. under MODVAT, excise is levied on final value and then rebate is given on inputs while under VAT, tax is levied only on value addition 4. MODVAT implies rationalization of excise duty only while VAT implies rationalization of excise, sales and turnover taxes etc. also Choose correct answer from:
A.	1, 2 and 4
B.	1, 3 and 4
C.	2, 3 and 4
D.	1, 2, 3 and 4
Answer» C. 2, 3 and 4

85.	Consider the following taxes: 1. Corporation Tax 2. Value Added Tax 3. Wealth Tax 4. Import duty Which of these is/are Indirect taxes?
A.	1 only
B.	2 and 4
C.	1 and 3
D.	1, 2 and 4
Answer» B. 2 and 4