1. When expenditure exceeds total tax revenue, it is called:
Correct : C. deficit budget
2. A pure private good is subject to:
Correct : B. exclusion
3. Which of the following is not a fiscal instrument?
Correct : A. open market operations
4. An increase in tax rate when tax base expands represents:
Correct : A. progressive taxation
5. The main difference between Public and Private Finance is:
Correct : A. balance of income‐expenditure
6. The name of the Chairman of the 11th Finance Commission
Correct : A. k.c. pant
7. Income tax is based on the principle of:
Correct : A. ability to pay
8. The Principle of Maximum Social Advantage is associated with:
Correct : A. dalton
9. Which is not the characteristic of a tax?
Correct : C. non –compulsory payment
10. Special assessment means:
Correct : C. a tax for specific benefit conferred
11. Classical canons of taxation are propounded by:
Correct : A. adam smith
12. The Kelkar Proposals are concerned with:
Correct : B. recommendations for tax reforms
13. Value Added Tax is:
Correct : B. indirect tax
14. In the case of direct tax, impact and incidence are on:
Correct : B. same person
15. The direct violation of Tax law is called:
Correct : A. tax evasion
16. The final resting place of the burden of tax is called:
Correct : D. incidence
17. Incidence of tax refers to:
Correct : 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:
Correct : A. progressive
19. Which of the following taxes is the most likely to be regressive?
Correct : B. excise duties on kerosene
20. Impact of tax refers to:
Correct : A. initial resting place of the burden of tax
21. Fiscal policy is the policy of:
Correct : C. government
22. The principle of judging fiscal measures by the way they work is called:
Correct : C. functional finance
23. When individuals with unequal tax paying ability should be taxed unequally in order to
equalise sacrifice is called:
Correct : C. tax paying ability
24. The following is an example of direct taxes:
Correct : B. income tax
25. If the rate of tax falls with an increase in income, it is called:
Correct : C. regressive tax
26. Which is the method of financial adjustment between Centre and States?
Correct : A. tax sharing
27. Who suggested an expenditure tax as an alternative to income tax?
Correct : D. kaldor
28. Budget is an instrument of:
Correct : B. fiscal policy
29. The concept of functional finance was developed by:
Correct : B. a.p. lerner
30. The modern state is:
Correct : B. welfare state
31. According to Musgrave the major functions of public finance is:
Correct : D. all the above
32. Who is the author of the book “The Theory of Public Finance”?
Correct : B. r.a. musgrave
33. A criterion by which public goods are distinguished from private goods:
Correct : A. exclusion principle
34. Who was the first to recommend the adoption of an expenditure tax for India?
Correct : D. n. kaldor
35. The controlling authority of Government expenditure is:
Correct : C. ministry of finance
36. The idea of ‘Democratic Decentralization’ in India was popularized by:
Correct : C. ashok mehta committee, 1978
37. Which one of the following is the most acceptable theory of taxation:
Correct : C. ability to pay theory
38. The incidence of tax refers to:
Correct : B. who ultimately pays the tax
39. The theory of fiscal policy derives from
Correct : A. principle of sound finance
40. The most important source of public revenue is
Correct : C. tax
41. Fiscal Federalism refers to
Correct : C. division of economic functions and resources among different layers of govt.
42. Which one of the following is an optional function of Government?
Correct : B. old age security
43. Principle of sound finance refers to
Correct : C. revenue expenditure balanced at the minimum level
44. Private goods are characterized by
Correct : D. all the above
45. Tax refers to
10
Correct : B. payment by the people to government
46. . Pump priming is
Correct : A. injection of purchasing power into the public through government spending
47. Merit goods means
Correct : B. public goods
48. The most important aim of fiscal policy in a developing country is
Correct : B. economic development
49. The income of the government through all its sources is called
Correct : B. public revenue
50. Which of the following are indirect taxes?
Correct : D. all the above
51. The Finance Commission is appointed in every
Correct : C. 5 year
52. The maximum effect of direct taxes is on
Correct : B. income
53. The Wanchoo Committee (1971) probed into
Correct : A. direct taxes
54. Modvat means
Correct : A. modified value added tax
55. The revenue of the State Government is raised from the following sources except one,
which is that?
Correct : D. expenditure tax
56. The Finance Commission does all the following functions except one, which is that?
Correct : D. assist the planning commission in making 5 year plans.
57. Primary deficit means:
Correct : A. fiscal deficit‐ interest
58. Non‐Plan Grants are determined by
Correct : C. central government
59. Public Debt Management refers to
Correct : D. all the above
60. Public Expenditure increases
Correct : B. employment
61. Central Assistance for State and UT plan is a part of
Correct : 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
Correct : B. arthur laffer
63. Functional Finance functions through
Correct : D. all the above
64. The ideal system of public Finance is one where the net benefit is
Correct : A. maximum
65. The principle of Maximum Social Advantage is connected with
Correct : B. expenditure
66. Economic functions of the government are all the following EXCEPT to .
Correct : C. Increase the level of education.
67. Which of the following does NOT determine the nature of Public Economics?
Correct : 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?
Correct : A. Budget Deficit.
69. The Fundamental Theorem of Welfare Economics:
Correct : 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?
Correct : B. Increase taxes.
71. Public goods are difficult for a private market to provide due to:
Correct : 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:
Correct : D. Under-supplied.
73. The optimum level of economic activity and associated pollution from society's point of view occurs where:
Correct : 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:
Correct : A. Negative production externality.
75. In the case of a negative externality, the social marginal cost will:
Correct : B. Exceed the private marginal cost
76. Printing of new currency notes and RBI borrowings by government is called:
Correct : D. Deficit Financing.
77. Which of the following is not a characteristic of a tax?
Correct : 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?
Correct : 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?
Correct : D. Coase theorem.
80. Following are some of examples of Transfer Expenditure EXCEPT:
Correct : 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:
Correct : C. Unemployment.
82. Which of the following is NOT the effect of taxation on production?
Correct : A. Effects on the distribution of income and wealth.
83. A tax either on consumers or on producers:
Correct : D. Creates a dead weight loss for society as a whole.
84. The direct violation of Tax law is called:
Correct : C. Tax Evasion.
85. In the case of relatively elastic demand, the money burden of tax is on:
Correct : B. More on seller.
86. With increase in urbanisation and industrialisation, the role of Government started:
Correct : A. Increasing.
87. Which of the following is NOT the subject matter of Public Finance?
Correct : B. Business administration.
88. The most important aim of fiscal policy in a developing country is:
Correct : D. Economic development.
89. .If a good is a public good, then:
Correct : 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:
Correct : B. Markets fail to allocate resources efficiently.
91. The “Tragedy of the Commons” is:
Correct : 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:
Correct : A. Progressive Tax.
93. Loans taken by the government for purpose of war, earthquakes for covering budget deficit are:
Correct : B. Unproductive Debts.
94. The incidence of tax refers to:
Correct : D. Who ultimately pays the tax.
95. In the case of direct tax, impact and incidence are on: