The theory of “Maximum Social Advantage” in Public Finance was given by
(a) Robbins
(b) Musgrave
(c) Findley
(d) Dalton
Solution: (d)
The ‘Principle of Maximum Social Advantage’ was introduced by British economist Hugh Dalton. According to Dalton, “The best system of public finance is that which secures the maximum social advantage from the operations which it conducts.”
A tax is said to be regressive when its burden falls
(a) less heavily on the poor than on the rich
(b) more heavily on the poor than on the rich
(c) equally on the poor as on the rich
(d) None of these
Solution: (b)
In terms of individual income and wealth, a regressive tax imposes a greater burden on the poor than on the rich. There is an inverse relationship between the tax rate and the taxpayer’s ability to pay, as measured by assets, consumption, or income. These taxes tend to reduce the tax burden of the well-to-do, as they shift the burden disproportionately to the needy.
By whom was the autonomous investment separated from the induced investment?
(a) Schumpeter
(b) Malthus
(c) Joan Robinson
(d) Adam Smith
Solution: (a)
Under his concept of creative destruction, Schumpeter distinguished between two types of investment that he called induced and autonomous. Induced investment arose from the discrepancy between supply and demand and autonomous investment from resources and technology created by the entrepreneurs. He also introduced a concept of “saving up” which is different from saving in the neoclassical growth models. Saving up constituted the part of output that is withheld from investment and consumption.
VAT is imposed:
(a) Directly on Consumer
(b) On the first stage of production
(c) On the final stage of production
(d) On all stages between production and sale
Solution: (d)
Value Added Tax (VAT) is imposed on the value added to each commodity by a firm during all stages of production and distribution. In simple terms, it is a fee assessed against businesses at each step of the production and distribution process, usually whenever a product is resold or value is added to it. Valueadded taxation in India was introduced as an indirect value added tax (VAT) into the Indian taxation system from 1 April 2005.
aim of the Differentiated Interest Scheme was to provide concessional loans to _______.
(a) weaker section of the society
(b) Public Sector Industries
(c) Public Limited Companies
(d) big exports
Solution: (a)
The Differential Rate of Interest Scheme, formulated in March 1972, offers financial assistance at concessional rate of interest @ 4% to those who in tend taking up any productive activity and has been tailored for persons whose income is very low. This scheme is meant for:
• Persons belonging to SC/STs, Adivasis engaged in agricultural operations and/ or allied activities;
• Persons engaged in collection of forest products, fodder and selling these in markets;
• Persons engaged in Village and Cottage Industries on a very small scale; etc.
When price of a substitute of commodity ‘x’ falls, the demand for ‘x’:
(a) falls
(b) remains unchanged
(c) increases at an increasing rate
(d) rises
Solution: (a)
Cross Price Effect refers to effect on the demand for a given commodity due to a change in the price of a substitute commodity. A change (increase or decrease) in the price of substitutes directly affects the demand for a given commodity. When price of substitute goods (say, coffee) rises, demand for the given commodity (say, tea) also rises at its same price. It leads to a rightward shift in the demand curve of the given commodity. With decrease in price of substitute goods (coffee), demand for the given commodity (tea) also decreases. It shifts the demand curve of the given commodity towards left.
Mixed Economy means:
(a) Promoting both agriculture and industries in the economy
(b) Co-existence of public and private sectors
(c) Co-existence of rich and poor
(d) Co-existence of small and large industries
Solution: (b)
A mixed economy is variously defined as an economic system consisting of a mixture of either markets and economic planning, public ownership and private ownership, or free markets and economic interventionism. All modern economies are mixed where the means of production are shared between the private and public sectors.
Taxes are as certain as death, because
(a) They constitute the major source of government revenue.
(b) Government has no other source of revenue.
(c) Most PSUs are run inefficiently.
(d) Government has its own budget constraints
Solution: (a)
Benjamin Franklin’s utterance, “In this world nothing can be said to be certain, except death and taxes,” when applied in economics means that the largest amount of revenue raised by governments comes from taxation. The proverb draws on the actual inevitability of death to highlight the difficulty in avoiding the burden of taxes.
Which of the following subjects does not figure in the Concurrent List of our Constitution?
(a) Stock Exchanges and futures markets
(b) Protection of wild animals and birds
(c) Forests
(d) Trade unions
Solution: (a)
The Concurrent List or List-III is a list of 47 items given in Part XI of the Constitution of India, concerned with relations between the Union and States. Stock exchanges and futures markets come under the Union List.
A part of National Debt known as External Debt is the amount
(a) borrowed by its citizens from abroad
(b) lent by its citizens to foreign governments
(c) borrowed by its government from abroad
(d) lent by its government to foreign government
Solution: (c)
External debt (or foreign debt) is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.
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