90+ Public Economics Solved MCQs

1.

When expenditure exceeds total tax revenue, it is called:

A. surplus budget
B. balanced budget
C. deficit budget
D. none of these
Answer» C. deficit budget
2.

A pure private good is subject to:

A. non exclusion
B. exclusion
C. low satisfaction
D. none of thse
Answer» B. exclusion
3.

Which of the following is not a fiscal instrument?

A. open market operations
B. public expenditure
C. taxation
D. none of these
Answer» A. open market operations
4.

An increase in tax rate when tax base expands represents:

A. progressive taxation
B. regressive taxation
C. proportional taxation
D. none of these
Answer» A. progressive taxation
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
Answer» A. balance of income‐expenditure
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
Answer» A. k.c. pant
7.

Income tax is based on the principle of:

A. ability to pay
B. willingness to pay
C. benefits received
D. none of these
Answer» A. ability to pay
8.

The Principle of Maximum Social Advantage is associated with:

A. dalton
B. pigou
C. seligman
D. hicks
Answer» A. dalton
9.

Which is not the characteristic of a tax?

A. import content
B. compulsory payment
C. non –compulsory payment
D. punishment to tax evader
Answer» C. non –compulsory payment
10.

Special assessment means:

A. general tax on all people
B. gift tax
C. a tax for specific benefit conferred
D. none of these
Answer» C. a tax for specific benefit conferred
11.

Classical canons of taxation are propounded by:

A. adam smith
B. bastable
C. dalton
D. keynes
Answer» A. adam smith
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
Answer» B. recommendations for tax reforms
13.

Value Added Tax is:

A. direct tax
B. indirect tax
C. progressive tax
D. none of these
Answer» B. indirect tax
14.

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

A. different person
B. same person
C. sellers
D. none of these
Answer» B. same person
15.

The direct violation of Tax law is called:

A. tax evasion
B. tax avoidance
C. tax rebate
D. none of these
Answer» A. tax evasion
16.

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

A. tax avoidance
B. tax evasion
C. impact
D. incidence
Answer» D. incidence
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
Answer» B. final resting place of the burden of tax
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
Answer» A. progressive
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
Answer» B. excise duties on kerosene
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
Answer» A. initial resting place of the burden of tax
21.

Fiscal policy is the policy of:

A. rbi
B. nabard
C. government
D. all the above
Answer» C. government
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
Answer» C. functional finance
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
Answer» C. tax paying ability
24.

The following is an example of direct taxes:

A. sales tax
B. income tax
C. estate duties
D. toll tax
Answer» B. income tax
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
Answer» C. regressive tax
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
Answer» A. tax sharing
27.

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

A. musgrave
B. galbraith
C. dalton
D. kaldor
Answer» D. kaldor
28.

Budget is an instrument of:

A. monetary policy
B. fiscal policy
C. trade policy
D. exchange rate policy
Answer» B. fiscal policy
29.

The concept of functional finance was developed by:

A. j.m. keynes
B. a.p. lerner
C. kaldor
D. pigou
Answer» B. a.p. lerner
30.

The modern state is:

A. laissez –faire state
B. welfare state
C. aristocratic state
D. police state
Answer» B. welfare state
31.

According to Musgrave the major functions of public finance is:

A. allocative function
B. distributive function
C. stabilisation function
D. all the above
Answer» D. all the above
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
Answer» B. r.a. musgrave
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
Answer» A. exclusion principle
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
Answer» D. n. kaldor
35.

The controlling authority of Government expenditure is:

A. rbi
B. planning commission
C. ministry of finance
D. finance commission
Answer» C. ministry of finance
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
Answer» C. ashok mehta committee, 1978
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
Answer» C. ability to pay theory
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
Answer» B. who ultimately pays the tax
39.

The theory of fiscal policy derives from

A. principle of sound finance
B. n.i. analysis
C. welfare economics
D. none of these
Answer» A. principle of sound finance
40.

The most important source of public revenue is

A. fees
B. commercial revenue
C. tax
D. fines & penalties
Answer» C. tax
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
Answer» C. division of economic functions and resources among different layers of govt.
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
Answer» B. old age security
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
Answer» C. revenue expenditure balanced at the minimum level
44.

Private goods are characterized by

A. application of exclusion principle
B. rivalry in consumption
C. payment of prices
D. all the above
Answer» D. all the above
45.

Tax refers to 10

A. compulsory contribution
B. payment by the people to government
C. no direct return for the payment
D. all the above
Answer» B. payment by the people to government
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
Answer» A. injection of purchasing power into the public through government spending
47.

Merit goods means

A. private goods
B. public goods
C. subsidized private goods
D. none of these
Answer» B. public goods
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
Answer» B. economic development
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
Answer» B. public revenue
50.

Which of the following are indirect taxes?

A. customs duties
B. excise duties
C. sales tax
D. all the above
Answer» D. all the above
51.

The Finance Commission is appointed in every

A. 3 year
B. 4 year
C. 5 year
D. 6 year
Answer» C. 5 year
52.

The maximum effect of direct taxes is on

A. price of food
B. income
C. capital goods
D. consumer goods
Answer» B. income
53.

The Wanchoo Committee (1971) probed into

A. direct taxes
B. indirect taxes
C. agricultural holding tax
D. non‐tax revenue
Answer» A. direct taxes
54.

Modvat means

A. modified value added tax
B. moderate value added tax
C. modest value added tax
D. modern value added tax
Answer» A. modified value added tax
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
Answer» D. expenditure tax
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.
Answer» D. assist the planning commission in making 5 year plans.
57.

Primary deficit means:

A. fiscal deficit‐ interest
B. revenue deficit‐interest payments
C. fiscal deficit+ revenue deficit
D. budgetary deficit
Answer» A. fiscal deficit‐ interest
58.

Non‐Plan Grants are determined by

A. planning commission
B. finance commission
C. central government
D. state government
Answer» C. central government
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
Answer» D. all the above
60.

Public Expenditure increases

A. interest rate
B. employment
C. exports
D. imports
Answer» B. employment
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
Answer» C. non‐plan expenditure
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
Answer» B. arthur laffer
63.

Functional Finance functions through

A. buying and selling
B. giving and taking
C. lending and borrowing
D. all the above
Answer» D. all the above
64.

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

A. maximum
B. minimum
C. zero
D. infinity
Answer» A. maximum
65.

The principle of Maximum Social Advantage is connected with

A. taxation
B. expenditure
C. public debt
D. both (a) and (b)
Answer» B. expenditure
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.
Answer» C. Increase the level of education.
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.
Answer» D. Public Economics studies the behaviour of private firms and is called economics of Priavte Sector.
68.

Which of the following describes the situation where all taxes and other revenues are less than expenditures during a given period?

A. Budget Deficit.
B. Budget Surplus.
C. Balanced Budget.
D. Public Debt.
Answer» A. Budget Deficit.
69.

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.
Answer» D. Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
70.

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.
Answer» B. Increase taxes.
71.

Public goods are difficult for a private market to provide due to:

A. The free-rider problem.
B. The Tragedy of the Commons.
C. The public goods problem.
D. The rivalness problem.
Answer» A. The free-rider problem.
72.

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.
Answer» D. Under-supplied.
73.

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.
Answer» C. Marginal social benefit = Marginal social cost.
74.

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.
Answer» A. Negative production externality.
75.

In the case of a negative externality, the social marginal cost will:

A. Be equal to private marginal cost.
B. Exceed the private marginal cost
C. Fall short of private marginal cost.
D. Bear no significant relation to private marginal cost.
Answer» B. Exceed the private marginal cost
76.

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

A. Government Loans.
B. Government Securities.
C. Government Bonds.
D. Deficit Financing.
Answer» D. Deficit Financing.
77.

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.
Answer» C. There is a quid-pro-quo between the tax payer and the Government.
78.

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.
Answer» B. The right not to transfer the good to others.
79.

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.
Answer» D. Coase theorem.
80.

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.
Answer» B. Social infrastructure such as education, health and family welfare.
81.

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.
Answer» C. Unemployment.
82.

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.
Answer» A. Effects on the distribution of income and wealth.
83.

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.
Answer» D. Creates a dead weight loss for society as a whole.
84.

The direct violation of Tax law is called:

A. Tax Avoidance.
B. Tax Rebate.
C. Tax Evasion.
D. Tax Incidence.
Answer» C. Tax Evasion.
85.

In the case of relatively elastic demand, the money burden of tax is on:

A. Entirely on seller.
B. More on seller.
C. Entirely on buyer.
D. More on buyer.
Answer» B. More on seller.
86.

With increase in urbanisation and industrialisation, the role of Government started:

A. Increasing.
B. Declining.
C. Stagnant.
D. Unstable.
Answer» A. Increasing.
87.

Which of the following is NOT the subject matter of Public Finance?

A. Public Revenue & Expenditure.
B. Business administration.
C. Public Debt.
D. Fiscal Policy.
Answer» B. Business administration.
88.

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

A. Public Revenue.
B. Regional balance.
C. Economic stability.
D. Economic development.
Answer» D. Economic development.
89.

.If a good is a public good, then:

A. People who do not pay can be excluded from consuming the good.
B. Consumption is regulated.
C. People who do not pay cannot be excluded from consuming the good.
D. Consumption is deregulated.
Answer» C. People who do not pay cannot be excluded from consuming the good.
90.

A market failure can best be defined as a situation where:

A. Markets enable buyers to gain utility.
B. Markets fail to allocate resources efficiently.
C. Markets fail to enable sellers to make profits.
D. Markets encourage people to take risks.
Answer» B. Markets fail to allocate resources efficiently.
91.

The “Tragedy of the Commons” is:

A. Discovery of corruption among members of the Society.
B. Existence of Market Failure.
C. Exhaustion of resources that are collectively owned.
D. Outrageous crime in a Boston public park.
Answer» C. Exhaustion of resources that are collectively owned.
92.

A tax that takes away a higher proportion of one's income as the income rises is termed as a:

A. Progressive Tax.
B. Regressive Tax.
C. Proportional Tax.
D. Indirect Tax.
Answer» A. Progressive Tax.
93.

Loans taken by the government for purpose of war, earthquakes for covering budget deficit are:

A. Productive Debts.
B. Unproductive Debts.
C. Voluntary Debts
D. External Debts.
Answer» B. Unproductive Debts.
94.

The incidence of tax refers to:

A. The level and rate of taxation.
B. The growth of taxation.
C. The way in which tax is collected.
D. Who ultimately pays the tax.
Answer» D. Who ultimately pays the tax.
95.

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

A. Same person.
B. Sellers.
C. Different person.
D. Producer.
Answer» A. Same person.
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