Economics (Part – IV) - Mock Test 365

Total Questions: 50

31. Who among the following formulates the fiscal policy in India? [S.S.C. Online Stenographer, 14.09.2017 (Shift-I)]

(a) Planning Commission
(b) Finance Commission
(c) Reserve Bank of India
(d) Ministry of Finance

Correct Answer: (d) Ministry of Finance

Solution:In India, fiscal policy is formulated by the Ministry of Finance through its budget proposals. RBI formulates monetary policy. The Finance Commission gives recommendations about allocation of financial resources between center and states. And the Planning Commission formulates Five Year Plans.

32. Fiscal policy helps the government of a country to control the flow of: [S.S.C. Online MTS (T-I) 27.10.2021 (Shift-I)]

(a) tax revenues
(b) personal expenditure
(c) angel investment
(d) equity market

Correct Answer: (a) tax revenues

Solution:Through fiscal policy, the government of a country controls the flow of tax revenues and public expendi-ture to navigate the economy.

33. When the fiscal deficit is high, what happens to prices? [S.S.C. Online C.G.L. (T-I) 12.06.2019 (Shift-II)]

(a) Prices increase
(b) Prices decrease
(c) Prices remain stable
(d) There is no direct impact on prices

Correct Answer: (d) There is no direct impact on prices

Solution:When the fiscal deficit is high, there is no direct impact on the prices. When the government spends more money than what they earned during the fiscal year, then it is known as a fiscal deficit.

34. Which of the following statements is NOT true? [S.S.C. Online MTS (T-I) 11.10.2021 (Shift-II)]

(a) Fiscal policy deals with the supply of money in the economy and the rate of interest.
(b) The government deals with fiscal policy.
(c) Fiscal policy is linked with general economic policy strategy of the country.
(d) Fiscal policy includes tax policy, expenditure policy, investment or disinvestment strategies and debt or surplus management.

Correct Answer: (a) Fiscal policy deals with the supply of money in the economy and the rate of interest.

Solution:

Fiscal policy deals with the supply of money in the economy and the rate of interest is NOT a correct statement. Rest all statements are true.

35. The Fiscal Responsibility and Budget Management Act 2003 set a target to limit India's fiscal deficit up to_______ of the GDP by 2021 [S.S.C. Online CGL (T-I) 21.04.2022 (Shift-I)]

(a) 2%
(b) 3%
(c) 6%
(d) 5%

Correct Answer: (b) 3%

Solution:As per the latest target of the FRBM Act:

Government is required to limit the fiscal deficit to 3% of the GDP by March 31, 2021

Government is required to limit debt of the central government to 40% of the GDP by the year 2024-25

36. What was the estimation for the fiscal deficit in the financial year 2019-20? [S.S.C. Online CHSL (T-I) 13.04.2021 (Shift-III)]

(a) 3.6% of GDP
(b) 3.1% of GDP
(c) 3.2% of GDP
(d) 3.3% of GDP

Correct Answer: (d) 3.3% of GDP

Solution:The fiscal deficit was projected to be 3.3% of GDP in the financial year 2019-20. The country's fiscal deficit is projected at 6.4% of the GDP for this fical ending March 2023 as against 6.71% for previous year 2022.

37. Fiscal policy is based on the economic theory given by which of the following economists? [S.S.C. Online Constable GD 1.03.2019 (Shift-I)]

(a) John Nash
(b) John Maynard Keynes
(c) Adam Smith
(d) Milton Friedman

Correct Answer: (b) John Maynard Keynes

Solution:British economist John Maynard Keynes proposed the theory of Fiscal policy. He gave a different outlook on macroeconomics and the economic policies of the government. He is well known for the theory called 'Keynesian Economics'. Initially, the theory was that if a worker is flexible in their wage demands that will automatically provide full employment but he argued that total demand determines the total supply and the level of unemployment. He proposed the use of monetary and fiscal policy to mitigate the effect of economic recession and depression.

38. The concept of fiscal policy is based fundamen-tally on the ideas of_________ . [S.S.C. Online CHSL (T-I) 09.08.2021 (Shift-I)]

(a) Milton Friedman
(b) Elinor Ostrom
(c) Warren Buffett
(d) John Maynard Keynes

Correct Answer: (d) John Maynard Keynes

39. A substantial increase in capital expenditure or revenue deficit leads to_______ . [S.S.C. Online C.G.L. (T-I) 12.06.2019 (Shift-I)]

(a) Revenue Deficit
(b) Fiscal Deficit
(c) Primary Deficit
(d) Budgetary Deficit

Correct Answer: (b) Fiscal Deficit

Solution:

A substantial increase in capital expenditure or revenue deficit leads to Fiscal Deficit.

40. A___________ occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. [S.S.C. Online C.G.L. (T-I) 7.06.2019(Shift-II)]

(a) Budgetary Deficit
(b) Revenue Deficit
(c) Fiscal Deficit
(d) Current Account Deficit

Correct Answer: (c) Fiscal Deficit

Solution:A Fiscal Deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings.

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Economics (Part – IV)