Test - Fiscal Policy


15 Questions MCQ Test Economy Traditional for UPSC (Civil Services) Prelims | Test - Fiscal Policy


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QUESTION: 1

Fiscal Policy in India is formulated by which of the following?

Solution:

Ministry of finance is the nodal agency for formulation of the fiscal policy

QUESTION: 2

Which of the following items come under ‘Current Account’ of the Balance of Payment?
1. Exports 
2. Interest payments 
3. Private remittance 
4. FDI 
5. External lending and borrowing 
Select the correct answer using the code given below:

Solution:

FDI and external lending and borrowing come the capital account as they are long term. Current account transactions are calculated on a yearly basis.

QUESTION: 3

Which of the following sources form part of the Revenue Receipts of the government? 
1. Interests received by the government on loans 
2. Interests paid by the government on loans 
3. Penalties & fines received by the government 
4. Borrowings by the government 
Select the correct answer using the code given below:

Solution:

Interest paid by the government on loans is called revenue expenditure. Borrowing by the government comes under capital account

QUESTION: 4

Which of the following statements on N.K SinghCommittee recommendations are correct?
1. Revenue deficit target of 0.8% by 2023.
2. Fiscal policy anchor should be public debt to GDP ratio.
3. Target of fiscal deficit of 3.5% by 2023.
Select the correct code

Solution:

N.k singh committee report recommended to reduce the fiscal deficit from 3.5 percent in 2017 to 2.5 percent by 2023.

QUESTION: 5

If we deduct grants for creation of capital assets from revenue deficit, we arrive at concept of

Solution:

Effective revenue deficit = revenue deficit minus(-) grants for creation of capital assents. It is the standard formula for ERD.

QUESTION: 6

Which of the following is/are part of Capital Account in Balance of Payments?
1. External bonds issued by the Government of  India.
2. Unilateral transfers like gifts and donations.
3. Quota payment to IMF. 
Select the correct code:

Solution:

Capital Account includes FDI, borrowing, quota to imf, external bonds issued gifts and donations come under current account.

QUESTION: 7

What is the primary deficit in the context of Indian budget?

Solution:

Primary deficit = fiscal deficit - interest payments. Standard formula

QUESTION: 8

The current account in relation to Balance of Payment include which of the following:
1. Trade in goods 
2. Invisible trade 
3. FDI 
4. Loans by World Bank and IMF
5. Gifts 
6. Remittances 
7. Trade in services
8. FII 
9. Transfer payments
Select the correct code:

Solution:

Capital Account includes FDI, borrowing, quota to imf, external bonds issued gifts and donations come under current account.

QUESTION: 9

With reference to the Government of India, which of the following is a Non Debt Capital Receipt?
1. Recovery of loans.
2. Securities against Public Provident  Fund.
3. Disinvestment receipts.
Which of the statements given above is/are Correct?

Solution:

Non debt receipts are those which does not create debt on the government. Provident funds are liabilities of government and it has to return those money back.

QUESTION: 10

Which of the following is a Fiscal Policy tool in India?
1. Goods and Services Tax
2. Repo rate
3. Corporate tax 
4. Public infrastructure spending
Select the correct option using the code  given below:

Solution:

Fiscal policy relates to government spending and taxation. Repo rate does come under fiscal measures. It is a monetary policy tool

QUESTION: 11

which of the following is a debt creating capital receipt?

Solution:

Market borrowing create debt on government and government has to repay the borrowed money

QUESTION: 12

Which of the following will be part of fiscal deficit?
1. Internal debt
2. Government’s external debt
3. Securities issued to food corporation of India
4. Liability to RBI
5. Liability of Central Government to states
Select the correct answer using the codes given below:

Solution:

3 is considered as central assistance and is not considered as part of fiscal deficit

QUESTION: 13

Which of the following will most accurately show the fiscal condition of an economy for current year?

Solution:

Fiscal deficit is the best representation of government deficit condition as it shows the revenue and expenditure of government in a broader sense amd estimate

QUESTION: 14

Which of the following receipts are the revenue receipts of Government?
1. Recovery of loans given to the states and union territories
2. Interest received from telecommunication
3. Debt and profit received from RBI
4. Income by tax
Select the correct option:

Solution:

Recovery of loans forms the part of capital account receipts

QUESTION: 15

Which of the following statement's is/are correct about effective revenue deficit?
1. This is the difference between revenue deficit and grants given for the capital formation.
2. Its main purpose is to show the structural imbalances in revenue account.
Codes:

Solution:

Effective revenue deficit = Revenue deficit - grants given to states for capital formation

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