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Question 1 of 5
1. Question
Which of the following action/actions can be taken by the Government to reduce the deficit budget?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Reducing import duty
Select the correct answer code:
Correct
Solution: c)
Statement 1: Unnecessary revenue expenditure bloats the fiscal deficit, and since it forms the majority of
government spending, its reduction has a very large effect on the fiscal deficit.
Statement 2: It will further increase the fiscal deficit.
Statement 3: Subsidies are a major component of government spending, and its reduction will cut down
fiscal deficit.
Statement 4: It reduces tax revenue and thus increases fiscal deficit.
Incorrect
Solution: c)
Statement 1: Unnecessary revenue expenditure bloats the fiscal deficit, and since it forms the majority of
government spending, its reduction has a very large effect on the fiscal deficit.
Statement 2: It will further increase the fiscal deficit.
Statement 3: Subsidies are a major component of government spending, and its reduction will cut down
fiscal deficit.
Statement 4: It reduces tax revenue and thus increases fiscal deficit.
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Question 2 of 5
2. Question
Which of the following statements best describes the ‘Seed Capital’?
Correct
Solution: d)
Seed capital is the funding required to get a new business started. This initial funding, which usually comes from the business owner(s) and perhaps friends and family, supports preliminary activities such as market research, product research and development (R&D) and business plan development.
Incorrect
Solution: d)
Seed capital is the funding required to get a new business started. This initial funding, which usually comes from the business owner(s) and perhaps friends and family, supports preliminary activities such as market research, product research and development (R&D) and business plan development.
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Question 3 of 5
3. Question
With reference to Indian economy, which of the following best describes Exit policy
Correct
Solution: a)
Exit policy means the policy regarding the retrenchment of the surplus labour force resulting from restructuring of industrial units and workers displaced by the closure of sick units. Exit may become necessary due to strategic reasons, financial constraints and environmental changes.
Incorrect
Solution: a)
Exit policy means the policy regarding the retrenchment of the surplus labour force resulting from restructuring of industrial units and workers displaced by the closure of sick units. Exit may become necessary due to strategic reasons, financial constraints and environmental changes.
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Question 4 of 5
4. Question
In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized when
Correct
Solution: b)
Consumer welfare refers to the individual benefits derived from the consumption of goods and services. In theory, individual welfare is defined by an individual’s own assessment of his/her satisfaction, given prices and income. Exact measurement of consumer welfare therefore requires information about individual preferences. The central idea in consumer welfare is to enhance consumer surplus which is the difference between what people prefer to pay and what they actually pay. The greater the difference, higher is the surplus. It means that the market is allocating goods most efficiently (at competitive prices) to people.
Incorrect
Solution: b)
Consumer welfare refers to the individual benefits derived from the consumption of goods and services. In theory, individual welfare is defined by an individual’s own assessment of his/her satisfaction, given prices and income. Exact measurement of consumer welfare therefore requires information about individual preferences. The central idea in consumer welfare is to enhance consumer surplus which is the difference between what people prefer to pay and what they actually pay. The greater the difference, higher is the surplus. It means that the market is allocating goods most efficiently (at competitive prices) to people.
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Question 5 of 5
5. Question
Which of the following measures is/are examples of expansionary fiscal policy?
- Decrease in tax rate
- Increase in pensions
- Increase in unemployment compensation
- Increase in tax rate.
Select the correct answer codes:
Correct
Solution: c)
An expansionary is a macroeconomic policy that seeks to encourage economic growth or combat inflationary price increases by expanding the money supply, lowering interest rates, increasing government spending or cutting taxes.
Increasing the tax rate is not an example of expansionary fiscal policy.
Incorrect
Solution: c)
An expansionary is a macroeconomic policy that seeks to encourage economic growth or combat inflationary price increases by expanding the money supply, lowering interest rates, increasing government spending or cutting taxes.
Increasing the tax rate is not an example of expansionary fiscal policy.
