TEST 03: ECONOMY

1. Consider the following statement about Fiscal Deficit

1. Fiscal deficit is expressed as a percentage of the Nominal GDP of India

2. Fiscal deficit allows for the shortfall in the income of the government to do welfare and development activities.

Choose the answer from the following code:

(A) Only 1

(B) Only 2

(C) Both 1and 2

(D) None of the above

2. Consider the following about Ways and Means Advances WMAs:

1. WMAs is given by RBI to Government of India and it requires collateral from the government.

2. WMAs are made at Repo Rate

Choose the answer from the following code:

(A) Only 1

(B) Only 2

(C) Both 1and 2

(D) None of the above

3. Which of the following is not a step of Fiscal consolidation?

(A) Decrease in the government expenditure for welfare activity

(B) Disinvestment of loss making PSUs

(C) Waving farmer’s loan

(D) Decreasing subsidy on petroleum product

4. Consider the following statements:

1. Tax Buoyancy refers to change in tax percentage with the growth of National Income

2. Tax elasticity is the percentage change in tax due to change in tax rate and increase of tax coverage.

Choose the correct answer from the following code:

(A) Only 1

(B) Only 2

(C) None of the above

(D) Both 1 and 2

5. Pigovian tax can be imposed on which of the following?

1. Alcohol

2. Public transport

3. Pollution by Industries

Choose the correct answer from the given code

(A) Only 1 and 2

(B) Only 1 and 3

(C) Only 2 and 3

(D) All the above

6. Consider the following statements:

1. Inverted duties promote domestic economy and export of finished products

2. Free Trade Agreements (FTA’s) can result in inverted duties Vis a Vis other non FTA partners.

Choose the correct answer from the following code:

(A) Only 1

(B) Only 2

(C) Both 1 and 2

(D) None of the above

7. Consider the following statements about GAAR:

1. It is a set of rules to prevent tax avoidance by arrangements primarily aimed at availing tax benefit without any commercial substance.

2. GAAR has come into effect from 1st April 2017 in India

Choose the correct answer from the following code:

(A) Only 1

(B) Only 2

(C) Both 1 and 2

(D) None of the above

8. Consider the following about the amendments in DTAA between India and Singapore:

1. The amendment provides for residence based taxation for capital gain rather than source-based.

2. The amendment will streamline investment prevent double non-taxation

Choose the correct answer from the following code

(A) Only 1

(B) Only 2

(C) Both 1 and 2

(D) None of the above

9. The Global Slavery Index is published by which of the following:

(A) German watch

(B) Amnesty International

(C) Walk free foundation

(D) Red Cross foundation

10. “CORSIA” often seen in the news is associated with which of the following:

(A) Refugee migration

(B) Nuclear proliferation

(C) Civil aviation

(D) Corruption

11. Consider the following statements

1. The Fiscal Responsibility and Budget Management ( FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.

2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.

3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

(A) 1 only

(B) 2 and 3 only

(C) 1 and 3 only

(D) 1, 2 and 3

12. The Fourteenth Finance Commission assigned different weight to the following parameters for distribution of tax proceeds to the States

1. Income distance

2. Population

3. Demographic changes

4. Area

Arrange the aforesaid parameters in descending order in terms of their weights

(A) 1-2-3-4

(B) 1-2-4-3

(C) 1-3-2-4

(D) 4-3-2-1

13. The rate which the income tax is imposed in India is called….

(A) Digressive rate

(B) Progressive rate

(C) Regressive rate

(D) Proportionate rate

14. Which among the following is the short name of highest authority in India for Indirect Taxes?

(A) CBED

(B) CBDT

(C) CBEC

(D) CBIT

15. Which of the following is not imposed by the Central Government?

(A) Agricultural tax

(B) Corporation tax

(C) Custom duty

(D) Sales tax

Answers

1. C

2. B

3. C

4. D

5. B

6. B

7. C

8. B

9. C

10. C

11. C

12. B

• 14th FC YV Reddy: the horizontal formula for tax distribution is- Population Census 1971 (17%), Demographic Change Census 2011 (10%), Income-Distance (50%), Area (15%), Forest-Cover (8%).

13. A

• In India, income tax is imposed at digressive rate. Under the digressive rate the rate of tax increases as the income increases initially while after a certain level of income it becomes proportionate.
• In India, the rate of tax on income up to Rs. 10 lakh increases while tax rate becomes proportionate after the 10 lac. However, the Government imposes a surcharge on those earning more than Rs.50 lakh.

14. C

15. A