Solution: (b)
Some examples of indirect taxes include value added tax, excise duty, sales tax, stamp duty and custom duty levied on imports. These are taxes levied by the state on expenditure and consumption, but not on property or income.
Value-added means the value of
(a) output at factor cost
(b) output at market prices
(c) goods and services less depreciation
(d) goods and services less cost of intermediate goods and services
Solution: (d)
Value added is an economic term to express the difference between the value of goods and the cost of materials or supplies that are used in producing them. It is a measure of economic activity which eliminates the duplication inherent in the sales value figure which results from the use of products of some establishments as materials or services by others. So it is of goods and services less cost of intermediate goods and services.
“Functional Finance” is associated with:
(a) Adolph Wogner
(b) Adam Smith
(c) Adams
(d) Abba ‘P’ Lerner
Solution: (d)
Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principle and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation.
Custom duty is an instrument of
(a) Monetary Policy
(b) Foreign Trade Policy
(c) Industrial Policy
(d) Fiscal Policy
Solution: (b)
Custom duty is a tax on imports imposed on an ad valorem basis, i.e, fixed in the form of a percentage on the value of the commodity imported.
Which one of the following is not included in the current revenue of the Union Government?
(a) Tax revenue
(b) Non-tax revenue
(c) Loans
(d) Interest payments
Solution: (c)
Loans are not included in the current revenue of the Union Government.
Taxation is a tool of
(a) Monetary policy
(b) Fiscal policy
(c) Price policy
(d) Wage policy
Solution: (b)
In economics, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure.
Which one of the following is not a ‘canon of taxation’ according to Adam Smith?
(a) Canon of certainty
(b) Canon of simplicity
(c) Canon of Convenience
(d) Canon of economy
Solution: (b)
In this book, titled ‘The Wealth of Nations, ‘Adam smith only gave four canons of taxation: (i) canon of equity; (ii) canon of certainty; (iii) canon of convenience; and (iv) canon of economy.
In an economy, the sectors are classified into public and private on the basis of
(a) employment conditions
(b) nature of economic activities
(c) ownership of enterprises
(d) use of raw materials
Solution: (c)
The classical breakdown of all economic sectors is: primary, secondary and tertiary. However, on the basis of ownership, the sectors are: business sector, private sector (privately run businesses), public sector (state sector) and voluntary sector.
Core Industries are
(a) Basic industries
(b) Consumer goods industries
(c) Capital goods industries
(d) Government industries
Solution: (a)
Core Industries are those necessary industries in an economy that are necessary for industrialization of a country. Such industries include Machine tools, chemicals, power, steel, etc. The Planning Commission of India has defined them as industries “involving significant investments or foreign exchange.” The Commission indicated that the core sector should include all the basic, strategic and critical industries, and no single criterion such as that of foreign exchange requirements should govern the definition of the core sector.
Underwriting refers to
(a) underestimation
(b) underselling
(c) winding up the business
(d) an act of insuring risk
Solution: (d)
The word “underwriter” is said to have come from the practice of having each risk-taker write his or her name under the total amount of risk that he or she was willing to accept at a specified premium. In a way, this is still true today, as new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment.
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