Fiscal Policy

As per the general economics and political sciences, a fiscal policy is a policy that usually includes the use of government revenue collection (that consists of taxes and tax cuts) and also the expenditure which can help in influencing the country’s economies. This approach to government revenue collection and expenditure for influencing the macroeconomics of a country came as a result of the great depression in the 1930s when the policy of laissez-faire was considered unsuccessful for the economy. Fiscal policy is a policy that is completely a Concept made by Britishers, this Concept was developed by a British economist named John Maynard Keynes, he mentioned in one of his theories that government must make changes in taxation and government must influence the aggregate demand and the range of economic activities. He generally believed that government can stabilize the business cycle and can control the economy of a country by governing tax policies and spending money to look after the shortfalls of the private sector. 

 In simple words, Fiscal Policy is said to be the utilization of government expenditure, multiple tax policies affect the economic conditions, especially the microeconomic Conditions; the microeconomic Conditions consist of terms like aggregate demand, growth in goods, services, and Employment, inflation, and economic growth. However, according to some Economics, fiscal policy is often considered in contrast Policy of the monetary policy because the steps in monetary policies are taken into control by the central bank authorities not by the government as is done the fiscal policy. 

MCQs on Fiscal Policy 

Q1 Name the policy that accords with expenditure and taxation policies decisions of the government? 

1. 1. Monetary Policy
   2. Fiscal Policy
   3. Labor Market Policies 
   4. Trade Policy 

Ans Option B – Fiscal Policy 

Fiscal Policy deals with decision-making in expenditure and taxation policies by the government. 

Q2 Which tax among the following generates the maximum amount of revenue for the government of India? 

1. 1. Custom Duties
   2. Income Tax
   3. Corporate Tax 
   4. Sales Tax 

Ans Option C – Corporate Tax 

The corporate tax is also considered to be the single largest form of income for the government of India. 

Q3 As per the reports of the Union Budget of 2021-22, state the number of the regional national institute of virology will be set up? 

1. 1. Two 
   2. Seven 
   3. One 
   4. Four 

Ans Option D – Four 

As per the rules of Union Budget 2021-22, the Central Government had decided to set up four regional national institutes of virology. 

Q4 Who leads the Goods and Services Tax or the GST tax of India? 

1. 1. President
   2. Prime Minister
   3. Finance Minister
   4. Home Minister 

Ans Option C – Finance Minister 

The Famous tax of India the Goods and Services Tax is looked out by the finance minister of India. 

Q5 See the following names of taxes and tell which one is not included in the Goods and Services Tax? 

1. 1. Corporate Tax 
   2. Service Tax 
   3. Custom Duty 
   4. Value Added Tax 

Ans Option – C Custom Duty 

The customs duty is taxes that are not included in GST taxes. 

Q6 If the grants for the creation of capital Assets are deleted from the revenue deficit, then what will be the scenario? 

1. 1. Fiscal Deficit
   2. Effective Revenue Deficit
   3. Primary Deficit
   4. Budget Deficit 

Ans Option – B Effective Revenue Deficit

According to the formula of ERD, Effective Revenue Deficit = revenue deficit – grants for the creation of the capital asset. 

Q7 Tell which among the following can be considered an instance of Direct taxes? 

1. 1. Sales Tax 
   2. Wealth Tax 
   3. Entertainment Tax 
   4. Value Added Tax 

Ans Option B – Wealth Tax 

Wealth Tax is an example of Direct taxes. 

Q8 Which work among the following is not part of the legislature organ of India? 

1. 1. Making Law 
   2. Budgeting
   3. Approving a budget 
   4. Regulations of executive 

Ans Option B – Budgeting 

The budget is maintained and made by the Department of Economic Affairs of the Ministry of Finance. The head of this committee is the finance minister who is a member of the executive. 

Q9 Thing that is not included in the central government Development spending? 

1. 1. Defense Expenditure
   2. Economic Service Expenditure
   3. Grants provided to state 
   4. Spending on social and community services 

Ans Option A – Defence Expenditure 

The central government Development Expenditure never consist of the defense Expenditure, it was looked at by the government of India. 

Q10 In which year railway budget was being merged with the general budget? 

1. 1. Budget 2016-17 
   2. Budget 2020-21 
   3. Budget 2017-18 
   4. Budget 2014-15 

Ans Option – C Budget 2017-18 

In the Budget for 2017-18, the railway budget and general budget were being merged under one roof and it was approved on September 21, 2016. 

 Q11 Identify the following, budget is an important part of whom 

1. 1. Fiscal Policy of Government
   2. Legislature
   3. Commercial Policy of Government
   4. Monetary Policy of Government

Ans Option A – Fiscal Policy of Government 

The budget is a very important part of the Fiscal Policy of the Government. 

Q12 From which year did the merged railway and general budget start? 

1. 1. 2017-18 
   2. 2018-19
   3. 2014-15 
   4. 2015-16 

Ans Option A- 2017-18 

The two budgets were being merged on the recommendation of a committee chairman of Niti aayog, this policy was being approved on September 21, 2016. And new budget system came into being in budget 2017-18. 

Q13 Which one among the following is not a part of Tax revenue in the state government of India? 

1. 1. Registration Fee
   2. Commercial Tax 
   3. Custom Duty
   4. Land Revenue 

Ans Option C – Custom Duty 

 Customs duties are taxes that are imposed on the import and export of goods. 

Q14 Which of the following is a railway budget? 

1. 1. Part of the state budget 
   2. Part of the Central budget
   3. Not part of the central budget
   4. Not part of the state budget

Ans Option B – Part of the Central budget 

The railway budget is an important part of the central budget. 

Q15 Which scheme among the following was announced in the Union Budget of 2022? 

1. 1. Make in India
   2. Ease of Doing Business 
   3. Pradhan Mantri Shram Yogi Maandham 
   4. Aatmanirbhar Bharat 

Ans Option B – Ease of Doing Business 

On February 1, 2022, Union Finance Minister Nirmala Sitaraman declared that the government will launch the next phase of the Ease of Doing Business scheme and this new phase was called “Ease of Doing Business 2.0 “. 

Q16 What is the process called when the total revenue of government without borrowing is less than the total expenditure 

1. 1. Fiscal Deficit
   2. Monetary Deficit
   3. Deficit Financing
   4. Budget Shortfall 

Ans Option A – Fiscal Deficit 

Fiscal Deficit = Total Expenditure – Total revenue excluding the borrowings. 

Q17 Which one among the following is the base year of the Rajasthan Sales Price index 

1. 1. 1986-87
   2. 1999-2000
   3. 2004-03
   4. 2013-14 

Ans Option A – 1999-2000

According to the office of the Economic and statistics department, the base year of the Rajasthan Sales Price index is 1999-2000. 

Q18 Which one among the following is a tool of Fiscal Policy? 

1. 1. Government Research
   2. Election
   3. Taxation
   4. None of the above 

Ans Option C – Taxation 

As discussed in the introduction, Taxation and tax policies are very important tools of Fiscal Policy. 

Q19 Which one among the following is included in the current account with the balance of payment

1. 1. Trade-in goods
   2. Remittances
   3. Transfer Payments
   4. FII
   5. Trade-in Services
   6. Gifts 
   7. Loans by the world bank and IMF 
   8. Invisible Trade 
   9. FDI 

Ans Usually a capital account consists of FDI, borrowing, quota to IMF, external bonds, issued gifts, and donations that come under the roof of the capital account

Q20 Which criteria among the following will help in showing the fiscal condition of an economy for the current year? 

1. 1. Revenue Deficit
   2. Fiscal Deficit
   3. Effective Revenue Deficit
   4. Primary Deficit 

Ans Option B – Fiscal Deficit

Fiscal Deficit is considered to be the best source of representation for government deficit Conditions and along with this fiscal Deficit also briefly shows the expenditure and revenue of government in a massive sense and estimate. 

Q21 Which one among the following is the correct definition of capital gains tax in India? 

1. 1. Tax on benefit from the sale of the capital asset during a particular year 
   2. Tax encountered on profit from the sale of shares held for more than a year 
   3. Tax levied on interest received from the fixed deposit of bank 
   4. Tax on dividends earned from corporate bonds 

Ans Option A – Tax on profit from a sale of the capital asset during a particular year. 

A Capital Gain tax is a tax that is a profit encountered on the sale of the non-inventory asset.