Free Fiscal Policy 03 Practice Test - 12th Grade - Commerce 

Question 1

Which of these is the one-for-all tax that replaced every other indirect tax?

A.

Sales tax

B.

VAT

C.

GST

D.

Customs duty

SOLUTION

Solution : C

GST ( Goods and Services Tax) is the indirect tax that replaced every other indirect tax.

Question 2

An ad valorem duty is a tax on the basis of:
 

A.

The price of a commodity

B.

The value added

C.

The advertisement expenditure

D.

The unit of the commodity

SOLUTION

Solution : A

Ad valorem depends on the price of the commodity.

Question 3

Fiscal Responsibility and Budget Management Act (FRBMA) ACT 2003 concerns:

A.

Fiscal deficit only

B.

Revenue deficit only

C.

Both fiscal and revenue deficit

D.

Neither fiscal nor revenue deficit

SOLUTION

Solution : C

The FRBMA was adopted to ensure complete fiscal stability in the economy.

Question 4

Companies pay Corporate Tax on their:

A.

Investment

B.

Production

C.

Sales proceeds

D.

Profits

SOLUTION

Solution : D

Corporate taxes are levied on company’s profits.

Question 5

Which one of the following statements appropriately describes the “fiscal stimulus”?

A.

It is a massive investment by the Government in the manufacturing sector to ensure that the supply of goods meets the demand surge caused by rapid economic growth.

B.

It is an intense affirmative action of the Government to boost economic activity in the country. 

C.

It is the Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation. 

D.

It is an extreme affirmative action by the Government to pursue its policy of financial inclusion. 

SOLUTION

Solution : B

Fiscal stimulus is a measure taken by the government to boost spending and the growth of the economy.

Question 6

A cut in direct taxes on households’ income:

A.

Has no effect

B.

Shifts the aggregate demand curve to the left

C.

Shifts the aggregate demand curve to the right

D.

Moves the economy along the aggregate demand curve

SOLUTION

Solution : C

A cut in direct taxes causes a rightward shift of the AD curve.

Question 7

If borrowing and other liabilities are added to the budget deficits we get_______________ :

A.

Fiscal Deficit

B.

Primary Deficit

C.

Capital Deficit

D.

Revenue Deficit

SOLUTION

Solution : A

Fiscal deficit estimates borrowings.

Question 8

Which of these is a side effect of deflation?

A.

Decreasing unemployment

B.

Increase in demand

C.

Economic depression

D.

Increase in personal expenditure.

SOLUTION

Solution : C

Deflationary periods often see depression or recession.

Question 9

Fiscal Deficit =

A.

Total expenditure - Total receipts other than borrowing

B.

Revenue expenditure - Revenue receipts

C.

Capital expenditure - Capital receipts

D.

Revenue expenditure + Capital expenditure - Revenue receipts

SOLUTION

Solution : A

Fiscal Deficit = Total expenditure - Total receipts other than borrowings

Question 10

Find Fiscal Deficit from the information given below:

Items                                                        (Rs in lakh)

(i) Borrowing by the government               600

(ii) Revenue receipts                                 100

(iii) Capital receipts                                    750

(iv) Interest payment                                  150

A.

100

B.

250

C.

600

D.

800

SOLUTION

Solution : C

Fiscal Deficit= Borrowings= 600 lakh 

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