Question 1

The system of assigning the source of revenue to the Central as well as State Governments is generally referred to as

Accepted Answer

The system of assigning the source of revenue to both Central and State Governments is referred to as federal finance. This system is characteristic of federal countries, where the constitution or legislative framework divides financial powers and responsibilities between different levels of government.

Question 2

The modern state is:

Accepted Answer

The modern state often refers to a welfare state, which is characterized by the government playing a key role in the protection and promotion of the economic and social well-being of its citizens, through measures such as social insurance, public health, and education.

Question 3

Which one of the following is the most acceptable theory of taxation:

Accepted Answer

The ability to pay theory is the most acceptable theory of taxation, as it is based on the principle that taxes should be levied according to an individual's or entity's ability to pay. This theory emphasizes fairness and equity in the tax system, ensuring that those with higher incomes or wealth contribute more to the public finances than those with less.

Question 4

The Indian income tax is:

Accepted Answer

The Indian income tax is a direct tax, meaning it is paid directly by individuals to the government, and it is progressive, meaning the tax rate increases as the taxable amount increases.

Question 5

The main objective of budgeting is:

Accepted Answer

Budgeting serves multiple purposes including planning, coordination, and control, making all the options correct.

Question 6

Wiseman?Peacock hypothesis supports in a much stronger manner the possibility of:

Accepted Answer

The Wiseman-Peacock hypothesis suggests that public expenditure tends to increase due to specific social and political factors, including the notion that taxpayers become more tolerant of higher taxes following periods of crisis or war, leading to an upward trend in public expenditure.

Question 7

A negative externality is

Accepted Answer

A negative externality occurs when a private action causes harm or adverse effects on third parties or the environment, which are not reflected in the cost of the action.

Question 8

The "Tragedy of the Commons" is

Accepted Answer

The "Tragedy of the Commons" refers to a situation where individual users, acting independently according to their own self-interest, deplete or spoil shared resources, even though it is not in anyone's long-term interest for this to happen.

Question 9

Which of the following is a public good?

Accepted Answer

The answer of Which of the following is a public...

Question 10

The provision of public goods requires

Accepted Answer

Public goods are typically provided by the government or through collective action because they are non-excludable and non-rivalrous, meaning they are available to all members of society and one person's use does not diminish another's. This characteristic makes it difficult for private firms to supply these goods competitively, as they cannot easily exclude non-payers, making options A, B, and C incorrect.

Question 11

When consumption of a good is non-rival and non-excludable, the good is a

Accepted Answer

Public goods are characterized by being non-rival (one person's consumption does not reduce the amount available for others) and non-excludable (it is not possible to prevent anyone from consuming the good), which matches the description given.

Question 12

Of those listed below, the best example of a pure public good is

Accepted Answer

A radio broadcast is a pure public good because it is non-excludable (anyone with a radio can listen to the broadcast without being able to be excluded) and non-rivalrous (one person listening to the broadcast does not prevent others from listening to it as well).

Question 13

Pure private goods are those for which consumption is

Accepted Answer

Pure private goods are characterized by being both rival (one person's consumption reduces the amount available for others) and excludable (it is possible to prevent someone from using the good).

Question 14

If the consumption of Good A by one person does not decrease the consumption of Good A by another person, then the good is said to

Accepted Answer

Non-rival goods are those where the consumption by one individual does not reduce availability for consumption by others. This characteristic defines non-rivalry in the context of goods and services.

Question 15

The nature of federalism was changed forever by

Accepted Answer

The Civil War fundamentally altered the nature of federalism in the United States by resolving the contentious issue of states' rights versus federal authority, leading to a stronger centralized federal government.

Question 16

Peacock and Wiseman Hypothesis on public expenditure consists of three concepts which are:

Accepted Answer

The Peacock and Wiseman Hypothesis on public expenditure includes the displacement effect, concentration effect, and inspection effect. These concepts explain how government expenditure can increase significantly during times of social upheaval or war (displacement effect), how this higher level of spending persists due to the concentration of political power (concentration effect), and how over time, taxpayers become more scrutinizing of government spending (inspection effect).

Quiz 4: Public Finance and Fiscal Policy