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B Com Exam  >  B Com Tests  >  Public Finance  >  Test: Public Debt - 3 - B Com MCQ

Test: Public Debt - 3 - B Com MCQ


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10 Questions MCQ Test Public Finance - Test: Public Debt - 3

Test: Public Debt - 3 for B Com 2024 is part of Public Finance preparation. The Test: Public Debt - 3 questions and answers have been prepared according to the B Com exam syllabus.The Test: Public Debt - 3 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Public Debt - 3 below.
Solutions of Test: Public Debt - 3 questions in English are available as part of our Public Finance for B Com & Test: Public Debt - 3 solutions in Hindi for Public Finance course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Public Debt - 3 | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Public Finance for B Com Exam | Download free PDF with solutions
Test: Public Debt - 3 - Question 1
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What is the relationship between public debt and economic stability?

Detailed Solution for Test: Public Debt - 3 - Question 1
The relationship between public debt and economic stability depends on how the borrowed funds are utilized. If public debt is used for productive purposes, such as building infrastructure or promoting economic development, it can lead to increased income, output, and employment, ultimately contributing to economic stability. However, if the debt is raised for consumption expenditure or non-productive purposes, it can result in economic instability due to inflationary pressures or a burden on future generations.
Test: Public Debt - 3 - Question 2
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How does the purpose of the loan affect the impact of public debt?

Detailed Solution for Test: Public Debt - 3 - Question 2
The purpose of the loan is a crucial factor in determining the impact of public debt on the economy. Borrowing for productive purposes, such as investing in infrastructure or development projects, can lead to increased income, output, and employment, contributing to economic stability. On the other hand, borrowing for consumption or non-productive purposes may result in inflationary pressures or a lack of productive capacity, potentially leading to economic instability.
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Test: Public Debt - 3 - Question 3
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What effect does external debt have on the economy?

Detailed Solution for Test: Public Debt - 3 - Question 3
External debt refers to loans borrowed from other countries or international organizations. The impact of external debt on the economy depends on how the borrowed funds are utilized. If external debt is used for productive purposes or economic development, it can lead to increased domestic production, income, and employment, thereby contributing to economic stability. However, if external debt is mismanaged or used for non-productive purposes, it can lead to economic instability and a burden on future generations.
Test: Public Debt - 3 - Question 4
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What is the significance of the rate of interest on public debt?
Detailed Solution for Test: Public Debt - 3 - Question 4
The rate of interest on public debt plays a significant role in determining the economic impact of borrowing. When a large amount of debt is incurred at a higher interest rate, a substantial portion of the national income may need to be allocated to debt repayment. This can lead to financial strain on the government's budget and impact the overall stability of the economy. Therefore, the rate of interest on public debt is an important consideration when assessing the sustainability of borrowing and its effects on economic stability.
Test: Public Debt - 3 - Question 5
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What is the relationship between public debt and inflation?
Detailed Solution for Test: Public Debt - 3 - Question 5
The relationship between public debt and inflation depends on the purpose of borrowing and the state of the economy. If public debt is used for consumption expenditure, it increases the aggregate demand in the economy, leading to inflationary pressures. However, if the borrowed funds are invested in productive projects that enhance the productive capacity of the economy, the inflationary impact may be mitigated. Public debt does not always lead to inflation; its effects vary based on how the funds are utilized.
Test: Public Debt - 3 - Question 6
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What is the main factor that determines the impact of external debt on the economy?
Detailed Solution for Test: Public Debt - 3 - Question 6
The impact of external debt on the economy is primarily determined by the purpose for which the borrowed funds are used. If external debt is utilized for productive purposes, such as economic development or infrastructure projects, it can lead to increased income, output, and employment, contributing to economic stability. However, if the borrowed funds are used for consumption or non-productive purposes, it may lead to economic instability and a burden on the economy. The purpose of external debt plays a crucial role in shaping its impact.
Test: Public Debt - 3 - Question 7
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What does the Dumitrescu-Hurlin pairwise causality test determine?
Detailed Solution for Test: Public Debt - 3 - Question 7
The Dumitrescu-Hurlin pairwise causality test is used to determine the causal relationship between different variables in the economy. It goes beyond the traditional Granger causality test by considering two dimensions of heterogeneity: the regression model used for testing causality and the heterogeneity in the causal relationship itself. This test helps identify whether one variable causes changes in another variable and provides insights into the direction of causality within the economic context.
Test: Public Debt - 3 - Question 8
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What does the Pedroni Test of cointegration examine?
Detailed Solution for Test: Public Debt - 3 - Question 8
The Pedroni Test of cointegration is used to examine the long-run association between different variables in the economy. It tests whether a stable relationship exists among the variables over time and whether they move together in the long run. This test helps identify whether changes in one variable have a significant impact on changes in another variable, indicating a long-term relationship between them.
Test: Public Debt - 3 - Question 9
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What is the significance of the rate of interest on public debt?
Detailed Solution for Test: Public Debt - 3 - Question 9
The rate of interest on public debt plays a significant role in determining the economic impact of borrowing. When a large amount of debt is incurred at a higher interest rate, a substantial portion of the national income may need to be allocated to debt repayment. This can lead to financial strain on the government's budget and impact the overall stability of the economy. Therefore, the rate of interest on public debt is an important consideration when assessing the sustainability of borrowing and its effects on economic stability.
Test: Public Debt - 3 - Question 10
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What is the key factor that determines the impact of public debt on economic growth?
Detailed Solution for Test: Public Debt - 3 - Question 10
The impact of public debt on economic growth is primarily determined by the purpose for which the borrowed funds are used. If public debt is utilized for productive purposes, such as investment in infrastructure or development projects, it can lead to increased income, output, and employment, contributing to economic growth. However, if the borrowed funds are used for consumption or non-productive purposes, the impact on economic growth may be limited. The purpose of public debt plays a crucial role in shaping its impact on economic growth.
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