Chapter-11: Multi Choice Questions and Answers in English
- What are the three broad functions of government ?
- a) Legislative, executive, judiciary
- b) Allocation, distribution, stabilization
- c) Taxation, expenditure, borrowing
- d) Public goods, private goods, common goods
- Which of the following is NOT an example of a public good ?
- a) Roads
- b) Parks
- c) Television
- d) Street lights
- What is the main source of revenue for the government ?
- a) Grants-in-aid
- b) Loans
- c) Taxes
- d) Fines
- Which type of tax is imposed directly on goods and services ?
- a) Direct tax
- b) Indirect tax
- c) Progressive tax
- d) Regressive tax
- What is the purpose of progressive taxation ?
- a) To impose the same tax rate on everyone
- b) To impose higher taxes on the wealthy
- c) To impose higher taxes on the poor
- d) To eliminate taxation altogether
- What is the primary purpose of stabilizing the economy ?
- a) To increase inflation
- b) To maintain price stability
- c) To decrease aggregate demand
- d) To encourage economic fluctuations
- What is the main component of the Capital Account in the government budget ?
- a) Revenue receipts
- b) Capital receipts
- c) Revenue expenditure
- d) Capital expenditure
- Which type of budget is characterized by government expenditure being higher than revenue ?
- a) Surplus budget
- b) Balanced budget
- c) Deficit budget
- d) Unbalanced budget
- What is the formula for calculating fiscal deficit ?
- a) Fiscal deficit = Total expenditure – Total revenue excluding borrowings
- b) Fiscal deficit = Revenue expenditure – Revenue receipts
- c) Fiscal deficit = Capital expenditure – Capital receipts
- d) Fiscal deficit = Total revenue – Total expenditure
- What is the main tool used by the government to stabilize the economy ?
- a) Fiscal policy
- b) Monetary policy
- c) Trade policy
- d) Industrial policy
- In a three-sector economy, which sectors are involved ?
- a) Household, firms, banks
- b) Household, firms, government
- c) Household, government, foreign sector
- d) Firms, government, foreign sector
- What happens to aggregate demand when government expenditure increases ?
- a) It decreases
- b) It remains constant
- c) It increases
- d) It becomes unpredictable
- What is the government expenditure multiplier if the MPC is 0.8 ?
- a) 0.2
- b) 5
- c) 0.8
- d) 4
- What is the tax multiplier if the MPC is 0.75 ?
- a) 1
- b) 3
- c) 4
- d) 0.25
- What type of fiscal policy involves deliberate actions by the government to stabilize the economy ?
- a) Automatic stabilizers
- b) Non-discretionary fiscal policy
- c) Discretionary fiscal policy
- d) Trade policy
- Which perspective views government debt as a burden on future generations ?
- a) Keynesian perspective
- b) Monetarist perspective
- c) Classical perspective
- d) Public finance perspective
- What type of tax varies with income ?
- a) Progressive tax
- b) Regressive tax
- c) Proportional tax
- d) Direct tax
- What is the purpose of transfer payments in fiscal policy ?
- a) To increase government revenue
- b) To stabilize the economy
- c) To reduce government debt
- d) To encourage investment
- Which of the following is NOT an example of automatic stabilizers ?
- a) Unemployment benefits
- b) Progressive taxation
- c) Discretionary fiscal policy
- d) Social welfare programs
- Which of the following is NOT a characteristic of a regressive tax ?
- a) The tax rate decreases as income increases
- b) It places a higher burden on low-income earners
- c) It takes a higher percentage of income from low-income earners
- d) Examples include sales tax and excise duty
