MCQs on Public Finance
Multiple Choice Questions
Public Finance and
Budgeting
Sheet
1
1. Positive economics
(a) does not depend on market interactions.
(b) only looks at the best parts of the economy.
(c) examines how the economy actually works (as opposed to how it should
work).
(d) is very subjective.
2. The Coase theorem has problems because
(a) generally, bargaining costs are not zero.
(b) individuals are not concerned with others.
(c) markets always exist.
(d) all of the above.
3. The marginal rate of substitution is
(a) the slope of the Pareto curve.
(b) the slope of the contract curve.
(c) the slope of the utility possibilities curve.
(d) the slope of the indifference curve.
4. The slope of the production possibilities curve is the
(a) marginal rate of substitution.
(b) contract curve.
(c) marginal rate of transformation.
(d) offer curve.
5. The First Fundamental Theorem of Welfare Economics requires
(a) producers and consumers to be price takers.
(b) that there be an efficient market for every commodity.
(c) that the economy operate at some point on the utility possibility
curve.
(d) all of the above.
6. The economic incidence of a unit tax is
(a) generally borne by the buyers.
(b) generally borne by sellers.
(c) generally borne by the government.
(d) independent of the statutory incidence for the tax.
7. Market failure can occur when
(a) monopoly power exists in the market.
(b) markets are missing.
(c) consumers can influence prices.
(d) all of the above.
8. A public good is
(a) a good that the public must pay for.
(b) nonrival in consumption.
(c) more costly than a private good.
(d) paid for by the government.
9. Movement from an inefficient allocation to an efficient allocation in
the Edgeworth Box will
(a) increase the utility of all individuals.
(b) increase the utility of at least one individual, but may decrease
the level of utility of another person.
(c) increase the utility of one individual, but cannot decrease the utility
of any individual.
(d) decrease the utility of all individuals.
10. Which source a private company cannot use?
a. A bank loan b.
A bank overdraft
c. Selling new shares in stock exchange d. Deficit Finance
11. The economic theory of optimal health care provision says that
(a) It is socially optimal for free medical treatment to be provided to
everyone
(b) Everyone should pay their own medical expenses because they will set
marginal cost equal to marginal benefit.
(c) Adverse selection can prevent efficient insurance markets from
developing even when everyone buys the same insurance.
(d) The optimal health care system will ration care: Some people who
would benefit from treatment should be denied that treatment.
12. Market mechanisms are unlikely to provide
(a) prices.
(b) nonrival goods efficiently.
(c) supply and demand.
(d) none of the above.
13. The
economic incidence of a unit tax is
(a)
generally borne by the buyers.
(b)
generally borne by sellers.
(c)
generally borne by the government.
(d)
independent of the statutory incidence for the tax.
14. Externalities can be positive because
(a) marginal damages do not last over time.
(b) utility can be impacted positively as well as negatively.
(c) there is no concept for marginal benefit.
(d) positive externalities are subsidies.
15. A Pigouvian subsidy
(a) cannot exist with externalities.
(b) is the same thing as a Pigouvian tax.
(c) is measured in terms of Pigouvian dollars.
(d) moves production to the socially optimal level of output
16. Which method can help in obtaining a welfare improvement if externalities
exist?
(a) Pigouvian taxes
(b) regulation
(c) assigning property rights and permitting bargaining
(d) all of the above
17. Marginal damages
(a) must always be considered in social marginal costs.
(b) must not be considered in social marginal costs.
(c) must sometimes be considered in social marginal costs.
(d) have nothing to do with social marginal costs.
18. In a public goods context, it is difficult to measure impact on real
income because
(a) public goods are generally free to the public.
(b) they make up a small percentage of total GDP.
(c) it is hard to measure how people value the public good.
(d) inflation decreases the value of the good.
19. A fully funded Social Security plan requires
(a) negative generational accounts
(b) no taxes since current workers pay for current retirees.
(c) future generations to pay for the benefits of current retirees
(d) retirees to be paid from investments that have accumulated with
interest over their working lives.
20. Social insurance can be justified on the grounds of
(a) adverse selection.
(b) decision-making costs.
(c) income distribution.
(d) all of the above.
21. Statutory incidence of a tax deals with
(a) the amount of revenue left over after taxes.
(b) the amount of taxes paid after accounting for inflation.
(c) the person(s) legally responsible for paying the tax.
(d) the amount of tax revenue generated after a tax is imposed.
22. An ad valorem tax is
(a) given as a proportion of the price.
(b) Latin for “buyer beware.”
(c) identical to a unit tax.
(d) computed using the “inverse taxation rule.”
23. Lump sum taxes
(a) create no excess burden.
(b) are not as widely used as other forms of taxation.
(c) generally lack a sense of equity.
(d) all of the above
24. If the proceeds from a Pigouvian tax are used to income tax rates,
then efficiency in both markets.
(a) increase; increases
(b) reduce; reduces
(c) increase; reduces
(d) reduce; increases
25 “For goods that are unrelated in consumption, efficiency requires that
tax rates be inversely proportional to elasticities.” This is the definition of
(a) the benefits-received principle.
(b) the Ramsey Rule.
(c) the second best principle.
(d) the inverse elasticity rule.
Sheet
2
1.
In the public finance, the government income has the same place which is gained
by ……………in study of economy.
(a)
Distribution (b)
Consumption
(c)
Production (d)
Exchange
2.
According to many thinkers, Ability to Pay Theory is based on which theory?
(a)
Public (b)
Universal
(c)
Individual (d)
All of these
3.
How the government can meet its
expenditure:
a. By taxing people b. By borrowing from banks
and other govts.
c. By
printing new money d.
By all the three methods
4.
Public Finance is related with the income and ................ of Public
Government.
(a)
Consumption (b)
Distribution
(c)
Debt (d)
Expenditure
5.
The difference between total
expenditure and total receipts is
a. Fiscal deficit b. Budget deficit
c. Primary deficit d. Revenue deficit
a. Fiscal deficit b. Budget deficit
c. Primary deficit d. Revenue deficit
6.
The functions of Public Finance is called the function of …………….
(a)
Federal (b)
Fiscal
(c)
Monetary (d)
Finance
7.
Adam
Smith wrote about function of state in ……….. in his book ‘Wealth of Nations’.
(a)
1876 (b)
1676
(c)
1776 (d)
1976
8.
The principal of public finance is also called the principal of ………….
(a)
Maximum Social Sacrifice (b)
Minimum Social Benefit
(c)
Minimum Social Sacrifice (d)
Maximum Social Benefit
9.
Which of the following is not a
union tax?
a. Taxes on railway freights and fares b. Stamp duties on financial documents
c. Tolls d. A and b only
a. Taxes on railway freights and fares b. Stamp duties on financial documents
c. Tolls d. A and b only
10.
Where, there is only taxation is taken then what will be the effect on
production due to it? (a) Production will not done (b) Production will continue
without any hurdle (c) Production will block (d) Production will stop completely.
11.
How many basic principles are there which guide government in financial
operations?
(a)
Three (b)
Four
(c)
Five (d)
Six
12. Which of the following is a union tax?
(a) Corporation tax (b) Taxes on agricultural income
(c) Capitation taxes (d) Land revenues
(a) Corporation tax (b) Taxes on agricultural income
(c) Capitation taxes (d) Land revenues
13. When the Government
spends money then there is some increment in …….
(a)
Utility (b)
Demand
(c)
Supply (d)
Saving
14. The tax levied by the union government on
income of individuals is known as
a. Personal income tax b. Interest tax
c. Wealth tax d. Corporation tax
a. Personal income tax b. Interest tax
c. Wealth tax d. Corporation tax
15. The tax on net income of companies is
a. Personal income tax b. Interest tax
c. Wealth tax d. Corporation tax
a. Personal income tax b. Interest tax
c. Wealth tax d. Corporation tax
16.
All type of income received to government is called ..............
income.
a.
Private b.
Public
c.
Company d.
Partnership
17.
In what public finance believed?
(a)
In public welfare (b)
In self welfare
(c)
In profit (d)
All of the above
18.
Who implemented the canon of taxation?
(a)
Headlay (b)
Adam Smith
(c)
Aristotle (d)
Bastable
19.
What must be the structure of taxation firstly?
(a)
Unproductive (b)
Productive
(c)
Consumption (d)
All of these
20.
Which includes all types of taxes according to needs is called.......
(a)
Defective Tax System (b)
Equitable Tax System
(c)
Ideal Tax System (d)
Destructive Tax System
21.
What is the only objective of private finance?
(a)
To do public welfare (b)
To get profit
(c)
To cause harm (d)
All of above
22.
………………...is that process in which taxpayer tries to shift burden of tax
on others.
a.
Impact of tax b.
Shifting of tax
c.
Incidence of tax d.
Elasticity of tax
23.
Shifting of tax depends on ..............of goods.
a.
Elasticity b.
Quality
c.
Quantity d.
Durability
24. Which of the following taxes is/are withdrawn
or abolished?
a. Interest tax b. Estate duty
c. Gift tax d. All the above
a. Interest tax b. Estate duty
c. Gift tax d. All the above
25. The most important source of revenue to the
states is
a. Sales tax b. Service tax
c. Excise duty d. None of the above
a. Sales tax b. Service tax
c. Excise duty d. None of the above
26. The tax levied on the interstate trade of
goods is
a. Sales tax b. Excise tax
c. Service tax d. Central sales tax
a. Sales tax b. Excise tax
c. Service tax d. Central sales tax
27.
The expenditure must be so that it increases …………….
(a)
Production (b)
Consumption
(c)
Distribution (d)
Exchange
28.
In which expenditure, the benefit also increases with the increase in income?
(a)
Equal proportional (b)
Proportional
(c)
Progressive (d)
Depressive.
29. Whatever less income a section has, if the
ratio of benefit from public expenditure is that much more then will it called?
(a)
Proportional expenditure (b)
Depressive expenditure
(c)
Progressive expenditure (d)
Above all.
30. The difference between revenue deficit and
grants for creation of capital assets is called
a. Fiscal deficit b. Budget deficit
c. Effective revenue deficit d. Primary deficit
a. Fiscal deficit b. Budget deficit
c. Effective revenue deficit d. Primary deficit
Sheet 3
31.
The government can collect funds
from
a. Taxes b.
Fees
c. Prices
of public goods d.
All the three
32.
Progressive taxes:
a. Increase government revenue
b. Bring equality in distribution of incomes
c. Act as penalty for rich people
d. Both a and b
33. The word ……….. is used normally for Government or State.
(a)
Public (b)
Private
(c)
Society (d)
Welfare
34. These are principle of taxation:
a. Principle of equality b. Principle of
certainty
c. Principle of secrecy d. Both a and b
35. Government taxing and spending policies are
called:
a. Monetary Policy b. Fiscal
Policy
c. Commercial Policy d. Finance Policy
36. Government budget is balanced when
a. Govt. expenditure outstrips tax receipts
b. Govt. tax receipts outstrips expenditure
c. Govt. expenditure equals tax revenues
d. None of the above
37. Government finance is called
a. National Finance b. Public Finance
c. Private Finance d. All of the above
38. Which operation is
considered Government borrowing by modern economists?
(a)
Complete (b) Incomplete
(c)
Important (d)
Total
39. In the time of emergency
from which sources, the government take debt?
(a)
only Indian (b)
only imported
(c)
Indian or imported (d)
all
40. Audit
of State Government is—
(A) A state subject
(B) A union subject
(C) In the concurrent list
(D) None of these
Ans : (B)
(A) A state subject
(B) A union subject
(C) In the concurrent list
(D) None of these
Ans : (B)
41. Who propounded principles of taxation:
a. Keynes b.
Marshall
c. Adam Smith d. Al
Ghazali
42. Which one of the following is not a feature
of private finance:
a. Balancing of income and expenditure b. Secrecy
c. Saving some part of income d. Publicity
43. These are heads of expenditure of the
government EXCEPT
a. Provide social services b. Defence
c. Improve transport and communication d. Provide cosmetics
44. Unfunded debts are those
debts which are paid back within …………
a.
two year b.
one year
c.
three year d.
six months
45. Which tax better conforms to the principle of
equality in taxation?
a. Progressive tax b. Regressive
tax
c. Proportional tax d. Fixed Tax
46. Which one is not a principle of taxation?
a. Principle of equality b. Principle of
certainty
c. Principle of equality d.
Principle of diversity
47. Points on the utility possibility
frontier are
(a) inefficient.
(b) points of incomplete preferences.
(c) not producible.
(d) Pareto efficient.
48. Who deals with income and
expenditure of public authorities?
a. Public finance b.
Private finance
c. Local Govt. d.
None of these
49.
Positive economics
(a)
does not depend on market interactions.
(b)
only looks at the best parts of the economy.
(c)
examines how the economy actually works (as opposed to how it should work).
(d)
is very subjective.
50.
Public goods can be
(a) provided privately.
(b) provided publicly.
(c) subject to free rider problems.
(d) all of the above.
51.
Statutory incidence of a tax deals with
(a)
the amount of revenue left over after taxes.
(b)
the amount of taxes paid after accounting for inflation.
(c)
the person(s) legally responsible for paying the tax.
(d)
the amount of tax revenue generated after a tax is imposed.
52. Public finance has to do
with all of the following activities of government except?
a. government taxing
activities
b. government’s direct competition with the private sector
c. allocation of resources
d. distribution of income
53. In
how many categories India ‘s public debt has been divided?
(a)
One (b)
Two
(c)
Three
(d) Four
54.
Permanent debt is known to which other form.
(a)
Temporary (b)
Public
(c)
Funded
(d) Permanent
55.
The burden of public debt is increasing which factor?
(a)
Tax (b)
Income
(c)
Expenditure (d)
Profit
56.
Progressive Tax System is that system in which what happens in the rate of tax
if there is an increase in income?
(a)
destruction (b)
becomes equal
(c)
growth (d)
becomes unequal
57)Receipts in budget can
be capital or revenue. Which of these is/are capital receipts?
1. Loan recoveries
2. Provident funds deposits
3. Grants
Select the correct answer using the codes given below.
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1, 2 and 3
1. Loan recoveries
2. Provident funds deposits
3. Grants
Select the correct answer using the codes given below.
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1, 2 and 3
58)If a government is
unable to pass the budget in Lok Sabha, then:
a) a totally new budget is presented.
b) the budget is revised and presented again.
c) the government has to resign.
d) none of the above
a) a totally new budget is presented.
b) the budget is revised and presented again.
c) the government has to resign.
d) none of the above
59)Gross budgetary support
means:
a) centre’s contribution to budget
b) expenditure in budget on social schemes
c) assistance provided by the Centre to five year plan.
d) none of the above
a) centre’s contribution to budget
b) expenditure in budget on social schemes
c) assistance provided by the Centre to five year plan.
d) none of the above
60. If the public debt can be financed without adding to inflation or
causing interest rates to rise, it is said to be:
a. only a burden on
future generations.
b. in primary balance
c. Sustainable
d. following the golden
rule of the public finances.
Sheet 4
61. The public debt of a country is not necessarily a
burden on the economy to the extent that:
a. It grows less rapidly than GDP. b. people receive
good public services
c. it is paid for by
borrowing abroad. d. It can be
financed without adding to inflation
62. …………….. can be presented in
parts at any level of Government.
a.
Debt b.
Revenue
c.
Expenditure d.
Budget
63.
The applications of budget starts in …….
a.
1573 b.
1773
c.
1673 d.
1873
64.Normally,
the time period of budget is ……… years.
a.
six months b.
two years
c.
one year d.
three years
65.Budget
is prepared on the basis of …………. amount.
a.
Gross b.
Net
c.
Revenue d.
Saving
66. The term
‘Performance Budget’ was coined by—
(A) Administrative Reforms Commission of India
(B) Second Hoover Commission of USA
(C) Estimates Committee of India
(D) First Hoover Commission of USA
Ans : (D)
67. During passing of budget in the Parliament ‘Guilotine’ is applied to those demands which are—
(A) Discussed and approved
(B) Discussed but not approved
(C) Discussed and reduced
(D) Not discussed for want of time
Ans : (D)
68. A direct tax is that which
(A) Administrative Reforms Commission of India
(B) Second Hoover Commission of USA
(C) Estimates Committee of India
(D) First Hoover Commission of USA
Ans : (D)
67. During passing of budget in the Parliament ‘Guilotine’ is applied to those demands which are—
(A) Discussed and approved
(B) Discussed but not approved
(C) Discussed and reduced
(D) Not discussed for want of time
Ans : (D)
68. A direct tax is that which
a. Is heavy burden on the tax payers
b. Can be directly deposited in the banks
c. Can not be evaded
d. Is paid by the person on whom it is levied
69. In which year was the Committee on Public
Undertakings constituted by the Lok Sabha ?
(A) 1953
(B) 1956
(C) 1963
(D) 1964
Ans : (D)
70. The number of demands in the general budget for civil expenditure is—
(A) 103
(B) 106
(C) 102
(D) 109
Ans : (A)
71. The rule of lapse means—
(A) All appropriations voted by the legislature expire at the end of the financial year
(B) All pending bills in Parliament lapse with its prorogation
(C) The demand for grants of a ministry lapse with criticism of its policy by the opposition
(D) The appropriation bill lapses if it is not returned by the Rajya Sabha within 14 days
Ans : (A)
72. The C & AG of India does not audit the receipts and expenditure of—
(A) Municipal undertakings
(B) State Governments
(C) Government companies
(D) Central Government
Ans : (A)
73. The role of the Finance Commission in Central-State fiscal relations has been undermined by—
(A) The State Governments
(B) The Zonal Councils
(C) The Planning Commission
(D) The Election Commission
Ans : (A)
74. The Chairman of the Public Accounts Committee of the Parliament is appointed by—
(A) Speaker of Lok Sabha
(B) Prime Minister of India
(C) President of India
(D) Chairman of Rajya Sabha
Ans : (A)
75. The question asked orally after the question hour in the House is called—
(A) Supplementary question
(B) Short notice question
(C) Starred question
(D) Unstarred question
Ans : (C)
76. The economy cut motion seeks to reduce the proposed expenditure of a demand for grant by—
(A) Rupees one hundred
(B) Rupee one
(C) A specified amount
(D) An unspecified amount
Ans : (C)
77. Who was the Chairman of the Economic Reforms Commission (1981-84) ?
(A) Dharam Vira
(B) L. K. Jha
(C) K. Hanumanthiya
(D) B. G. Deshmukh
Ans : (B)
78. In which year was the decision of separating accounting function from audit function taken by the
Central Government for its financial administration ?
(A) 1950
(B) 1965
(C) 1976
(D) 2000
Ans : (C
(A) 1953
(B) 1956
(C) 1963
(D) 1964
Ans : (D)
70. The number of demands in the general budget for civil expenditure is—
(A) 103
(B) 106
(C) 102
(D) 109
Ans : (A)
71. The rule of lapse means—
(A) All appropriations voted by the legislature expire at the end of the financial year
(B) All pending bills in Parliament lapse with its prorogation
(C) The demand for grants of a ministry lapse with criticism of its policy by the opposition
(D) The appropriation bill lapses if it is not returned by the Rajya Sabha within 14 days
Ans : (A)
72. The C & AG of India does not audit the receipts and expenditure of—
(A) Municipal undertakings
(B) State Governments
(C) Government companies
(D) Central Government
Ans : (A)
73. The role of the Finance Commission in Central-State fiscal relations has been undermined by—
(A) The State Governments
(B) The Zonal Councils
(C) The Planning Commission
(D) The Election Commission
Ans : (A)
74. The Chairman of the Public Accounts Committee of the Parliament is appointed by—
(A) Speaker of Lok Sabha
(B) Prime Minister of India
(C) President of India
(D) Chairman of Rajya Sabha
Ans : (A)
75. The question asked orally after the question hour in the House is called—
(A) Supplementary question
(B) Short notice question
(C) Starred question
(D) Unstarred question
Ans : (C)
76. The economy cut motion seeks to reduce the proposed expenditure of a demand for grant by—
(A) Rupees one hundred
(B) Rupee one
(C) A specified amount
(D) An unspecified amount
Ans : (C)
77. Who was the Chairman of the Economic Reforms Commission (1981-84) ?
(A) Dharam Vira
(B) L. K. Jha
(C) K. Hanumanthiya
(D) B. G. Deshmukh
Ans : (B)
78. In which year was the decision of separating accounting function from audit function taken by the
Central Government for its financial administration ?
(A) 1950
(B) 1965
(C) 1976
(D) 2000
Ans : (C
79. Which one of the following departments of
Ministry of Finance is responsible for the preparation of budget of Government
of India?
a.
The
Department of Revenue
b.
The
Department of Expenditure
c.
The Department
of Economic Affairs
d.
The
Department of Financial services
80. Who appoints the Comptroller and Auditor General of India (CAG)?
a)
Prime minister
b)
Chief justice of India
c)
President
d)
Vice-president
81.
What is the tenure of the office of Comptroller and Auditor General of India
(CAG)?
a)
5 years or age of 60, whichever is lower
b)
6 years or age of 65, whichever is lower
c)
4 years or age of 65, whichever is lower
d)
Age of 60
82. Which of the following corporations
is fully audited by Comptroller and Auditor General of India (CAG)?
a) Reserve Bank of India
b) Life Insurance Corporation
c) Air India
d)
State Bank of India
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83. This tax is a good example of ability to pay principle of taxes:
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84. Mansoor Software Co imported computers and paid import tax. Burden
of tax will be on:
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85. To bring equitable distribution of income in the country taxes should be |
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86. Tax is a payment:
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87. The budget estimate prepared by ministry of finance is finally
approved by:
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88. Which of the following should NOT be the aim of a government: |
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