Deck 7: Economics and Public Finance

Question 1

Psychological law of consumption states that the value of MPC is lies between zero and

A)1
B)2
C)3
D)4

Answer 1

1

Question 2

Net investment is also known as

A)Depreciation
B)Induced investment
C)Autonomous investment
D)Capital formation

Answer 2

Capital formation

Question 3

In the saving function S = -a + 1-b(Y), the term 'b' denotes

A)Saving
B)MPC
C)MPS
D)APS

Answer 3

MPC

Question 4

Who propounded Psychological law of consumption

A)Adam Smith
B)Ricardo
C)Keynes
D)Pigou

Question 5

When MPS = 0.2, MPC will be

A)0.8
B)0.2
C)1.2
D)20

Question 6

In the linear consumption function C = a + b(Y), coefficient 'a' denotes

A)MPC
B)APC
C)Autonomous consumption
D)Induced consumption

Question 7

In the equation C = 60 + 0.6 Y, MPC is

A)60
B)0.6
C)0
D)1

Question 8

Keynes assumed the presence of --------- economy for the fundamental law of consumption

A)Capitalistic
B)Socialistic
C)Planned
D)None of the above

Question 9

Which of the following is a union tax?

A)Corporation tax
B)Taxes on agricultural income
C)Capitation taxes
D)Land revenues

Question 10

Which of the following is not a union tax?

A)Taxes on railway freights and fares
B)Stamp duties on financial documents
C)Tolls
D)A and b only

Question 11

The tax levied by the union government on income of individuals is known as

A)Personal income tax
B)Interest tax
C)Wealth tax
D)Corporation tax

Question 12

The tax on net income of companies is

A)Personal income tax
B)Interest tax
C)Wealth tax
D)Corporate tax

Question 13

The most important source of revenue to the states is

A)Sales tax
B)Service tax
C)Excise duty
D)None of the above

Question 14

The difference between revenue expenditure and revenue receipts is

A)Revenue deficit
B)Fiscal deficit
C)Budget deficit
D)Primary deficit

Question 15

The difference between total expenditure and total receipts is

A)Fiscal deficit
B)Budget deficit
C)Primary deficit
D)Revenue deficit

Question 16

Maximum Social Advantage is achieved,

A)at the point where the marginal social benefit of public expenditure and the marginal social sacrifice of taxation are equated
B)at the point where the marginal social benefit of public expenditure is higher than the marginal social sacrifice of taxation
C)at the point where the marginal social benefit of public expenditure is lower than the marginal social sacrifice of taxation
D)at the point where the marginal social benefit of public expenditure and the marginal social sacrifice of taxation are zero

Question 17

Which one of the following economists introduced the principle of "Maximum Social Advantage"?

A)Alfred Marshall
B)John Maynard Keynes
C)Karl Marx
D)Hugh Dalton

Question 18

In a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large. Adam Smith referred this as:

A)Invisible hand
B)Direct Intervention
C)Collective Spirit
D)Private Spirit

Question 19

The role of Government would be highest in which of the following type of economy:

A)Free market economy
B)Keynesian Economy
C)Mixed Economy
D)Socialist Economy

Question 20

Taxes are levied to

A)Provide general benefits to the People
B)Encourage people on unnecessary spending
C)Accumulate funds for the Government for future use
D)All of the above

Question 21

Which of the following factors contribute to public debt of a country?

A)To undertake public welfare
B)Urge for economic growth
C)Inefficiencies of public organisations and corruption
D)All of the above

Question 22

Which of the following are the causes of public debt of a country?

A)War or war-preparedness, including nuclear programmes
B)To cover the budget deficits on current account
C)To undertake public welfare schemes
D)All of the above

Question 23

Which of the following statement is INCORRECT with regard to the burden of public debt of a country?

A)If the public debt is taken for productive purposes it will not be a burden on the economy.
B)If the public debt is taken for unproductive purposes, it will impose both money burden and real burden on the economy.
C)In case of Internal Debt, the direct money burden on the economy is huge as transfer of wealth happens within the community
D)In the case of External debt, the amount of repayment of interest and principal represents the direct money burden on the community

Question 24

Public Debt means

A)Borrowing by a Government from abroad and does not include borrowing from within the country
B)Borrowing by general public, private individuals or association of individuals from the Government which they need to repay to Government under the prescribed terms and conditions
C)Borrowing by General Public in the form of loans or advances from the Government, Local Bodies, Government owned financial institutions
D)Borrowing by a Government from within the country or from abroad, from private individuals or association of individuals or from banking and non-banking institutions

Question 25

Debt obligations of the government that have maturities of one year or less is normally called

A)Commercial Papers
B)Commercial Deposits
C)Treasury Bills
D)Certificate of Deposits