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Prelims-IAS –ECONOMICS MCQ Ans-16

1.. 

  • ANS-D
  • Importers and exporters are allowed free conversion of rupee in case of current account convertibility.
  • India has partial Capital Account Convertibility (CAC). Capital Account Convertibility means that rupee can now be freely convertible into any foreign currencies for acquisition of assets like shares, properties and assets abroad.
  • At present, there are limits on investment by foreign financial investors and also caps on FDI ceiling in most sectors.
  • India’s current account is today fully convertible (operationalized on August 19, 1994).

2..

  • ANS-D
  • Progressive tax is a tax in which the tax rate increases as the tax base increases. Here the rate of taxation increases as the income increases. Progressive taxes reduce the incidence of taxes on people with lower incomes. Thus people with lower ability-to-pay, actually pay less.
  • Proportional taxation is a tax where the rate of taxation is fixed. The amount of the tax is a fixed proportion of one’s income. It is also called as flat tax.
  • Sales tax on food items is an example of regressive tax. Sales taxes on food items tend to make up a higher percentage of a lower income consumer’s overall budget. However it makes up a very low percentage of income in a higher income consumerâ€TMs budget. In this case, even though the tax may be uniform, lower income consumers are more affected by it because they are less able to afford it.

3…

  • ANS-B
  • Gender Budgeting refers to taking into consideration the gender sensitivities while allocating funds for various schemes and hence examining how the budget allocations effect the social and economic opportunities of men and women.
     

4…

  • ANS-A
  • Revenue neutral rate is the procedure in which when tax laws are changed there is no effect on the amount of money received by government.
  • Revenue neutral rate is in the news because of the discussion on GST (Goods and services tax) in which states are supposedly in loss if the GST is to be implemented. Revenue neutral rate is in the picture so that the states don’t suffer loss because of new tax regime.

5…

  • ANS-C
  • Debt trap is a situation in which a debt is difficult or impossible to pay typically because high interest payments prevent re-payment of principal.
  • To break out of the debt trap, the government would have to raise revenues and cut spending.

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