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Prelims-IAS –ECONOMICS MCQ-14

1..Which of the following statements regarding the buoyancy of the tax system is correct?

(a)  It is the responsiveness of tax revenues to changes in the tax rate and in the tax base in relation to the GDP.
(b)  It is the ratio of percentage change in tax revenue to percentage change in GDP, without any changes in the tax rate or tax base.
(c)  Under this system, government’s revenue collection, mainly from direct tax, increases without increasing the tax rate.
(d)  Both the statements (a) and (c) given above are correct.


2.. In Economic terminology, the term “Transfer Payments” is used for:
(a)  Payments made in lieu of imported goods and services in an economy.
(b)  Subsidies by government which are directly credited to the beneficiary accounts.
(c)  Payments made by government for which there is no economic activity involved like scholarship and pension.
(d)  Transfer of money from remittances taken as a whole for an economy.


3..Consider the following statements regarding deficit financing in India :

  1. Money for deficit financing can be generated by printing more currency.
  2. Borrowing from domestic banks and market preferred over borrowing from external market because repayment of borrowing from external market depend on exchange rate which is risky.
  3. Aids from IMF and other institutions are not generally used for deficit financing.

Which of the options given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3


4..Consider the following statements: The Indian rupee is fully convertible

  1. In respect of Current Account of Balance of Payment
  2. In respect of Capital Account of Balance of Payment
  3. Into gold

Which of the statements is/are correct?

(a) 1 only
(b) 3 only
(c) 1 and 2 only
(d) 1, 2 and 3


5..Consider the following statements regarding Budgeting in India:

  1. Revenue expenditure reduces the assets of the government while capital expenditure leads to reduction in capital stock.
  2. Revenue receipts do not impact liability status of the government where as capital receipts add to the liabilities.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only

(c) Both 1 and 2
(d) Neither 1 nor 2


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