Fiscal Policy(12th Grade > Economics - 2 ) Questions and answers for exam Preparation

12th Grade > Economics - 2

FISCAL POLICY MCQs

Total Questions : 30 | Page 3 of 3 pages

Question 21. Fiscal Policy refers to a policy of:

Money lenders
Government Finance
Commercial banks
Monetary authority

Discuss Question

Answer: Option B. -> Government Finance
:
B
Fiscal policy is a policy of government finance.

Question 22. Total expenditure of a government budget is Rs 75,000 crore and total receipts are Rs 45,000 crore. How much is the budget deficit?

15,000
30,000
45,000
1,20,000

Discuss Question

Answer: Option B. -> 30,000
:
B
Budget deficit = Revenues - Expenditure= 75,000 - 45,000= Rs 30,000 crore

Question 23. Which among the following is incorrect?

The Gross Fiscal Deficit (GFD) of government is the excess of its total expenditures, current and capital, including loans net of recovery, over revenue receipts (including external grants) and non - debt capital receipts
The Net Fiscal Deficit is the Gross Fiscal Deficit reduced by net lending by government
The Gross primary deficit is the GFD less interest payments
None of the above

Discuss Question

Answer: Option D. -> None of the above
:
D
All these statements are true.

Question 24. Which of the following is/are implications of a fiscal deficit?

National debts for future generation
Inflationary spiral
Erosion of government credibility
All of these

Discuss Question

Answer: Option D. -> All of these
:
D
All of these are implications of a fiscal deficit.

Question 25. Customs duty is imposed on:

Entertainment services
Domestic sales
Imported goods
None of the above

Discuss Question

Answer: Option C. -> Imported goods
:
C
Customs duty is levied on both imports and exports.

Question 26. An increase in government expenditure is likely to have a greater impact on national output than a reduction in taxes. Which of the following could be reasons for this?

Consumers respond to a fall in the tax rates by saving a part of the increase in their disposable income
Employees increase work hours in response to lower taxes
A reduction in net taxes is likely to lead to higher interest rates
The increase in government spending leads to a lower fiscal deficit

Discuss Question

Answer: Option A. -> Consumers respond to a fall in the tax rates by saving a part of the increase in their disposable income
:
A
Consumers respond to a fall in the tax rates by saving a part of the increase in their disposable income.

Question 27. A tax of Rs. 100 on the sale of every car is:

Direct tax
Proportional tax
Progressive tax
Lump-sum tax

Discuss Question

Answer: Option D. -> Lump-sum tax
:
D
A fixed amount of Rs. 100 would be a lump-sum tax.

Question 28. The government spending multiplier is higher as:

Higher is the government spending
Higher is the MPC
Lower is the MPC
Lower is the tax revenue

Discuss Question

Answer: Option B. -> Higher is the MPC
:
B
The multiplier is directly proportional to the MPC.

Question 29. Crowding out refers to:

intended investment squeezing unsold inventories
excess consumer spending competing with foreign demand for U.S. goods
the demand for exports making U.S. goods for expensive for consumers
reducing the availability of private capital

Discuss Question

Answer: Option D. -> reducing the availability of private capital
:
D
Crowding out refers to the process by which government deficits reduce the capital available in the economy.

Question 30. Which does the government not control directly?

Spending on health
Spending on defence
Firms' investment decisions
Spending on state education

Discuss Question

Answer: Option C. -> Firms' investment decisions
:
C
The government spends on health, defence, and education. Firms’ investment decisions are not controlled by the government.