Question 1

Fiscal Federalism refers to

Accepted Answer

Fiscal Federalism is concerned with the division of governmental functions and financial relations among levels of government, specifically focusing on the allocation of taxation and expenditure responsibilities.

Question 2

Which one of the following is an optional function of Government?

Accepted Answer

Old age security is considered an optional function of government, as it is a welfare program that governments may choose to implement to provide financial assistance to the elderly. Defense and law and order are considered essential functions of government.

Question 3

Principle of sound finance refers to

Accepted Answer

The answer of Principle of sound finance refers to
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Question 4

Private goods are characterized by

Accepted Answer

Private goods are characterized by the application of the exclusion principle (only those who pay can consume), rivalry in consumption (one person's consumption reduces the amount available for others), and the necessity for consumers to pay a price to obtain them.

Question 5

Tax refers to

Accepted Answer

The answer of Tax refers to
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Question 6

. Pump priming is

Accepted Answer

Pump priming refers to the injection of purchasing power into the public through government spending, typically to stimulate economic activity.

Question 7

Merit goods means

Accepted Answer

The answer of Merit goods means
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Question 8

The most important aim of fiscal policy in a developing country is

Accepted Answer

Economic development is the most important aim of fiscal policy in a developing country, as it focuses on promoting sustainable growth, reducing poverty, and improving the living standards of its population.

Question 9

The income of the government through all its sources is called

Accepted Answer

Public revenue refers to the income of the government through all its sources, including taxes, fees, fines, and other charges.

Question 10

Which of the following are indirect taxes?

Accepted Answer

All the options listed, customs duties, excise duties, and sales tax, are examples of indirect taxes. Indirect taxes are those that are levied on goods and services rather than on income or profits.

Question 11

The Finance Commission is appointed in every

Accepted Answer

The Finance Commission is appointed every five years to recommend the distribution of taxes between the central government and the states, among other functions.

Question 12

The maximum effect of direct taxes is on

Accepted Answer

Direct taxes, such as income tax, directly affect the income of individuals and corporations, reducing the amount of money they have available for spending or investment.

Question 13

The Wanchoo Committee (1971) probed into

Accepted Answer

The Wanchoo Committee, established in 1971, was tasked with investigating aspects of direct taxes to suggest reforms and improvements.

Question 14

Modvat means

Accepted Answer

Modvat stands for Modified Value Added Tax, which is a system allowing manufacturers to claim a refund on the tax paid on inputs.

Question 15

The revenue of the State Government is raised from the following sources except one, which is that?

Accepted Answer

Expenditure tax is not a source of revenue for State Governments; it is levied by the Central Government. State Governments typically do not have the authority to impose this type of tax.

Question 16

The Finance Commission does all the following functions except one, which is that?

Accepted Answer

The Finance Commission does not assist the Planning Commission in making 5-year plans. Its primary functions include the allocation of taxes in the divisible pool, examining financial relations between the center and states, and allocating grants-in-aid to states and union territories.

Question 17

Primary deficit means:

Accepted Answer

Primary deficit refers to the fiscal deficit minus interest payments. It shows the borrowing requirement of the government excluding interest payments on past loans.

Question 18

Non?Plan Grants are determined by

Accepted Answer

Non-Plan Grants are determined by the Central Government.

Question 19

Public Debt Management refers to

Accepted Answer

Public Debt Management encompasses all aspects related to the structuring and management of a government's debt, including the terms of new bonds, the proportion of different components of public debt, and the maturity of these debts.

Question 20

Public Expenditure increases

Accepted Answer

Public expenditure can lead to increased employment as government spending on infrastructure, services, and other areas can create jobs directly and indirectly by stimulating economic activity.

Quiz 1: Public Finance and Taxation Policy