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?
Sales tax
VAT
GST
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:
The price of a commodity
The value added
The advertisement expenditure
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:
Fiscal deficit only
Revenue deficit only
Both fiscal and revenue deficit
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:
Investment
Production
Sales proceeds
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”?
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.
It is an intense affirmative action of the Government to boost economic activity in the country.
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.
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:
Has no effect
Shifts the aggregate demand curve to the left
Shifts the aggregate demand curve to the right
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
Fiscal Deficit
Primary Deficit
Capital Deficit
Revenue Deficit
SOLUTION
Solution : A
Fiscal deficit estimates borrowings.
Question 8
Which of these is a side effect of deflation?
Decreasing unemployment
Increase in demand
Economic depression
Increase in personal expenditure.
SOLUTION
Solution : C
Deflationary periods often see depression or recession.
Question 9
Fiscal Deficit =
Total expenditure - Total receipts other than borrowing
Revenue expenditure - Revenue receipts
Capital expenditure - Capital receipts
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
100
250
600
800
SOLUTION
Solution : C
Fiscal Deficit= Borrowings= 600 lakh