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Public Finance & Budget — UPSC Prelims Economy previous year questions

162 solved previous year questions on Public Finance & Budget, papers from 1995 to 2022, drawn from UPSC CSE Prelims, UPSC CDS, UPPCS. Each carries the printed answer key and the explanation from the source compilation.

1. #1Previous year
   According to the Law of Diminishing Returns, in a production function, when more and more units of the variable factor used, holding qu_antities of a s t ) a p omt.teached beyonu which?
   • Athe marginal revenue will
   • Bthe average revenue will diminish
   • Cthe marginal product will diminish
   • Dthe marginal product will increase
   Answer: (C) the marginal product will diminish
   Explanation

   Option c is the correct to Law of Diminishing Marginal Returns, and more units of the variable factor are used, quantities of a fixed factor constant, a point is beyond which the marginal product, then the finally the total product will diminish. It is based on assumptions: No change in the technology used. It is applicable in the short run only. The output is measured in physical units or tonnes only. All units of variable factors of production are homogenous. Important Tips An economic theory that predicts that after some optimal level of capacity is reached, adding a factor of production will result in smaller increases in output is called the law of d iminishing marginal returns The Law of Variable Proportions: If all inputs are fixed except one (i.e. one input is made variable) then the firm's production function exhibits the law of variable proportions. i.e., by keeping other facto

2. #2UPSC CDS 2015
   What is meant by 'Price discrimination"?
   • AIncrease in price of a commodity over time
   • BA situation where the same product is sold to different consumers for different prices
   • CSubsidisation of a product by the government to sell it at a lower price
   • DGeneral decrease in price of a commodity over time
   Answer: (B) A situation where the same product is sold to different consumers for different prices
   Explanation

   Option b is the correct discrimination is a situation where the same sold to different consumers for different prices T,his for a variety of reasons, such as different pay, different costs of distribution, or different levels

3. #3UPSC CDS 2015
   In view of the fact that kerosene is an inferior good in India, what is/are its 1. As households get richer, they consume less kerosene. 2. Over time there is a decline in quality of kerosene. 3. Government needs to stop subsidies on kerosene.Select the correct answer using the codes given below
   • AOnly 1
   • B1 and 2
   • C2 and 3
   • D1, 2 and 3
   Answer: (A) Only 1
   Explanation

   Option a is the correct l is correct: As households get r.icher, to consume less kerosene. Th.is is because as people have the ability to afford better-quality such as electricity or cleaner fuels like LPG Z is incorrect: Decline in the quality of time, is not necessarily true. The quality of be regulated and maintained by the that consumers receive a consistent and

4. #4UPSC CDS 2014
   Which of the following statements are correct? 1. When marginal revenue is positive, total revenue increases with increase in output. 2. When marginal revenue is zero, total revenue is maximum. 3. When marginal revenue becomes negative, total revenue falls with increase in output.Select the correct answer using the codes given below
   • A1 and 2
   • B2 and 3
   • C1 and 3
   • D1, 2 and 3
   Answer: (D) 1, 2 and 3
   Explanation

   Option dis the correct I is correct: Marginal revenue is the generated from producing and selling one of output. When marginal revenue is positive, it the revenue from selling an additional unit exceeds of producing that unit. Therefore, increasing output to an increase in total 2 is correct: Total revenue is maximized revenue equals zero. At this point, the generated from producing and selling one becomes zero. Beyond this point, any fmther output would result in a negative marginal revenue and in total 3 is correct: When marginal revenue is negative, that the revenue from selling an additional unit is the cost of producing that unit In this case, would lead to a further decrease in total Solution Option d is the correct 1 is correct: Increase in demand and equal magnitude leads to an unchanged price but equilibrium 2 is correct: Increase in demand of than supply leads to an increase in

5. #5UPSC CDS 2014
   National product at factor cost is equal to
   • ADomestic product Net factor income from abroad
   • BNational product at market prices - Indirect taxes Subsidies
   • CGross domestic product - Depreciation
   • DNational product at market direct taxes Subsidies
   Answer: (B) National product at market prices - Indirect taxes Subsidies
   Explanation

   Option b is the correct product at factor cost refers to the total goods and services produced in an economy, the prices paid to factors of production (such as capital). By subtracting indirect taxes and from national product at market prices, the impact of these factors and arrive at at factor cost. Important Tips Gross Domestic Product at factor cost This is a commonly used parameter and helps calculate the output in terms of factors of production. GDP-FC GDP-MP Subsidies - Indirect Taxes Net National Product at factor cost This measures the total value of the cost of factors of production and net factor income abroad, i.e., the amount earned by domestic citizens overseas. NNP-F NNP-MP - Indirect Taxes Net Value Added at factor cost It accounts for the value of commodities and services produced in a country but excludes taxes and depreciation. NVA-FC GVA- Subsidies - Indirect Taxes

6. #6UPSC CSE Prelims 2022
   With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct? 1. Acquiring new technology is capital expenditure. 2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.Select the correct answer using the code given below
   • A1 only
   • B2 only
   • CBoth 1 and 2
   • DNeither 1 nor 2
   Answer: (A) 1 only
   Explanation

   Option a is the correct l is cotrect: Capital expenditures funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. 2 is incorrect: When a company borrows money to be paid back at a future date with interestit is known as debt financing. Repayment of loan is an example of capital expenditure. Equity financingis the process of raising capital through the sale of shares.It is an example of non debt capital receipts. Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. Examples of non-debt capital of loans and advances, disinvestment, issue of bonus shares, etc

7. #7Previous year
   Consider the following items: 1. Cereal grains hulled 2. Chicken eggs cooked 3. Fish processed and canned 4. Newspapers containing advertising materialWhich of the above items is/are exempted under GST (Goods and Services Tax)? [UPSC CSE Pre
   • A1 only
   • B2 and 3 only
   • C1, 2 and 4 only
   • D1, 2, 3 and 4
   Answer: (C) 1, 2 and 4 only
   Explanation

   Option c is the correct 1, 2 and 4 are Goods and Services Tax in India is destination-based value-added indirect tax. replaced many central and state indirect taxes in as the excise duty, VAT, services tax, are four slabs for taxes for both goods and and Although GST aimed at levying tax rate on all products and services, four slabs were introduced because daily necessities could subject to the same rate as luxury items. A number are exempted from GST i.e. they are kept at zero GST exempted from GST include fresh or pasteurized milk, curd, chena or paneer, and non-vegetarian eggs (cooked or raw), chicken, fresh meat, and chilled fish. Fruits, vegetables, as well as unit container packed frozen branded vegetables ( uncooked or steamed) items on this list include natural honey, hulled (like barley, wheat, oat), Palmyra jiggery are other items on the exempted list like items like envelope a

8. #8UPSC CSE Prelims 2017
   What is/are likely advantages of implementing 'Goods and Services Tax (GS l. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.Select the correct answer using the code given below
   • A1 only
   • B2 and 3 only
   • C1 and 3 only
   • D1, 2 and 3
   Answer: (A) 1 only
   Explanation

   Option a is the correct l is correct. GST will replace multiple by multiple authorities and will thus create a in 2 and 3 are incorrect. There is no between GST and 'drastic' reduction in Deficit and increase in India's forex rese rves. no conclusive evidence to support the argument that enable India to overtake China in near future

9. #9UPSC CSE Prelims 2016
   Which of the following is/are included in the capital budget of the Government of India? 1. Expenditure on acquisition of assets like roads, buildings, machinery, etc. 2. Loans received from foreign governments 3. Loans and advances granted to the States and Union TerritoriesSelect the correct answer using the code given below
   • A1 only
   • B2 and 3 only
   • C1 and 3 only
   • D1, 2 and 3
   Answer: (D) 1, 2 and 3
   Explanation

   Option d is the correct 2 and 3 are correct. Capital Budget consists receipts and payments. Capital receipts includes: loans raised by the government from the public; borrowings by the government from the Reserve Bank and other parties through sale of treasury bills, loans received from foreign bodies and governments, and recoveries of loans granted by the Central government to State and Union Territories (UTs) and other 1 is correct. Capital payments consist of on acquisition of assets like land, and equipment, as also investments in and advances

10. #10UPSC CSE Prelims 2015
    With reference to the Fourteenth Finance Commission, which of the following statements is/are correct? 1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent. 2. It has made recommendations concerning sector-specific grants.Select the correct answer using the code given below
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (A) 1 only
    Explanation

    Option a is the correct 1 is correct. The Fourteenth Finance to increase the tax devolution of the to states to for years 2015 to 2020. This is compared to target set by Thirteenth 2 is incorrect. Unlike the Thirteenth Fourteen Finance Commission has not sector specific grants. a.Qainst 2 State Ftmd 3 1 1 Oilier Receipts (Intemal Debt and 4 External 5 6 CD a -50000 17. Solution: (a) Exp) Option a is the correct answer: Statement I is correct and Statement 2 is incorrect Tax to GDP ratio compares the amount of taxes collected by a government to the amount of income that country receives for its products. A decrease in tax to GDP ratio of a country indicates a slowing economic growth. When tax revenues grow at a slower rate than the GDP of a country, the tax-to GDP ratio drops 18. Solution: (a) Exp) Option a is the correct answer A budget deficit is when spending exceeds income. Introducin

11. #11UPSC CSE Prelims 2014
    With reference to Union Budget, which of the following covered under Non- Plan Expenditure? 1. Defence expenditure 2. Interest payments 3. Salaries and pensions 4. SubsidiesSelect the correct answer using the code given below
    • A1 only
    • B2 and 3 only
    • C1, 2, 3 and 4
    • DNone
    Answer: (D) None
    Explanation

    Option d is the correct I is correct. Hike in interest rate in the US States Federal Reserve leads not only to an funds from equities into US treasury bonds but an outflow of funds from emerging economies to Thus, it impacts Indian Government Bond Yields 2 is correct. The multifaceted roles played RBI in the payment system, monetary policy, policy, and policy coordination with the it the operational ability to influence nominal yields by setting and changing the short term interest rate and using other tools of monetary it deems 3 is correct. Short-term interest rate and pace are the key drivers of interest rates on

12. #12Previous year
    In India, deficit financing is used for raising resources for [UPSC CSE Pre. 2013)
    • Aeconomic development
    • Bredemption of public debt
    • Cadjusting the balance of payments
    • Dreducing the foreign debt
    Answer: (A) economic development
    Explanation

    Option a is the correct financing is when a government spends more it receives as revenue, and makes up for the borrowing or printing new currency. In India, this done for economic development

13. #13Previous year
    What is the difference betvveen and budge 1. The provision of a is used by a regular Government, while an "interim budget" is a provision used by a caretaker Government 2. A "vote-on-account" only deals with the expenditure in Government budget, while an "interim budget" includes both expenditure and receipts.Select the correct answer using th e code given below: [UPSC Pre
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (B) 2 only
    Explanation

    Option b is the correct 1 is Vote on account and can be presented by both the regular the caretaker 2 is correct. A "vote-on-account" only deals expenditure in Government budget, while an includes both expenditure and receipts. Vote is just an interim permission to spend money an interim Budget which is an elaborate of expenditure and receipts including changes and government policies

14. #14UPPCS 2014
    Exdse Duty on liquor is imposed by
    • ACentral Government
    • BState Governments
    • CNagar Nigams
    • DDistrict Boards
    Answer: (B) State Governments
    Explanation

    Option bis the correct duty on liquor is a tax levied on the production, consumption of liquor. The power to levy excise liquor is vested in the State Governments, not in Government. Alcoholic liquors intended for are subject to taxation by State Entry 51 of List of the Seventh Schedule to of India. On the other hand, alcoholic meant for human consumption fall under the purview central legislature for the levy of excise duty, as Entry 84, List I. Important Tips State List Entry Number 51: (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry

15. #15UPPCS 2011
    Consider the following statements and select th.e conrect answer from the codes given below the statements: Statement (A): Zero-Base Budget has been introduced in India n Reason Zero-Base Budget technique involves a critical review of every scheme before a budgetary provision is made. Select the correct answer from the codes given below
    • ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    • BBoth (A) and (R) are correct, but (R) is not the correct explanation of (A)
    • C(A) is true, but (R) is false
    • D(A) is false, but (R) is true. 39, Which of the followi ng is not eligible for any income
    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)
    Explanation

    Option a is the correct (A) is true: The Zero-Based Budget (ZBB) in India's Department of Science and 1983. In 1986, it became a systematic (R) is true: ZBB is a budgeting technique all expenses to be justified and approved in budget period, typically each year. This means line item in the budget must be justified, regardless it was fonded in the previous are correct) and statement (R) statement (A): Zero -Base Budgeting was India to bring a more rigorous and transparent budgeting, ensuring that budget allocations are based thorough analysis of the effectiveness and necessity of or scheme. Important Tips Traditional vs Zero Based Budgeting It is when the budget is It is a method of prepared by taking the budget preparation immediately preceding that involves that year's budget as a base. whenever the budget is set, the activities are re - It focuses on previous levels of expenditure. eva

16. #16UPPCS 2008
    As compared to deficit, fiscal deficit will always remain
    • AHigher
    • BLower
    • CSame
    • DAll the above
    Answer: (A) Higher
    Explanation

    Option a is the correct deficit is always higher than revenue deficit. is a broader measure of the government's ition than revenue deficit. It takes into account all of spending, including both and Total Expenditure - Total Receipts OR (Revenue Expenditure - (Revenue Receipts Capital (Revenue Expenditure - Revenue Rece ipts ) - Capital Receipts excluding Revenue Deficit (Capital Expenditure - excluding Borrowings ) Important Tips Other Types of Deficits in India: Revenue Deficit: This type of deficit arises when the government's revenue expenditure exceeds its revenue receipts. It indicates that the government is relying on borrowing to meet its regular expenses Revenue Revenue expenditure -- Revenue receipts Primary Deficit: The primary deficit is calculated by subtracting interest payments from the fiscal deficit. It represents the gap between the government's total expenditure and its

17. #17UPPCS 2009
    The Finance Ministry (Government of India) has introduced the concept of 'Outcome-Budget' from 2005. Under this, the monitoring of the outcomes will be the responsibility of
    • AUnion Cabinet
    • BPlanning Commission
    • CFinance Ministry and Planning Commission jointly
    • DMinistry of Programme Implementation
    Answer: (C) Finance Ministry and Planning Commission jointly
    Explanation

    Option c is the correct Outcome-Budget, introduced in 2005, focuses outcomes rather than inputs It results against objectives. The Finance the Commission were jointly responsible monitoring of the outcomes under the of Planning Commission with in 2014, Development Monitoring and (DMEO) of NITI Aayog and Department of Finance Ministry handles the Important Tips Outcome-Based Budgeting (OBB): Oti.tcome-Based Budgeting (OBB) is a budgeting process that focuses on achieving measurable results and outcomes from government programs Setting Measurable Targets: OBB establishes specific and measurable targets for each project, such as constructing schools or providing healthcare se rvices: Linking Funds to Outcomes: Funds allocated to projects are directly tied to the intended outcomes. For example, construction of schools resulting in increment in literacy rate. Progress Tracking: OBB serves as

18. #18UPPCS 2006
    Which one of the following is not an objective of fiscal policy of of India?
    • AFull employment
    • BPrice stability
    • CRegulation of inter-state trade
    • DEquitable distribution of wealth and income
    Answer: (C) Regulation of inter-state trade
    Explanation

    Option c is the correct policy is a government policy that uses taxation, and borrowing to achieve The goal of fiscal policy is to goals such as full employment, equitable distribution of wealth and income growth. Regulation of inter-state trade is not of fiscal policy. This is because fiscal policy macroeconomic policy, while regulation of is a microeconomic policy. Macroeconomic with the overall economy, while microeconomic with individual industries or markets

19. #19UPPCS 2005
    Which one of the following sets of sources of revenue belongs to the Union Government alone?
    • AGift tax, Holding tax
    • BSales tax, Income tax
    • CCustoms duties, Corporation tax
    • DWealth tax, L and revenue 1,' _
    Answer: (C) Customs duties, Corporation tax
    Explanation

    Option c is the correct duties and Corporation tax belong to the alone as sources of revenue. Customs duties are taxes imposed on imports and exports, and the power to levy and collect customs duties is exclusively vested with the Union Government. tax is a tax levied on the income of companies or corporations, and it is also within the purview of the Union Government

20. #20UPPCS 1995
    Which of the following taxes does not directly increase the price of a commodity to buyers
    • AIncome tax
    • BTrade Tax
    • CImport Duty
    • DExcise Duty
    Answer: (A) Income tax
    Explanation

    Option a is the correct tax is a direct tax levied on individuals paid directly by taxpayers. It doesn't affect of commodities. In contrast, trade tax, import excise duty are indirect taxes, passed on to buyers prices for goods and services

21. #21State PCS 2019
    Why the indirect taxes are termed regressive taxing mechanism?
    • AThey are charged at higher rate than direct taxes
    • BThey are charged the same rates for all income groups
    • CThey are not charged the same for all income groups
    • DNone of these
    Answer: (B) They are charged the same rates for all income groups
    Explanation

    Option b is the correct taxes are termed regressive because they same tax rate on all individuals, irrespective of levels. This means that low-income earners proportion of their income on indirect taxes high--income earners. For example, a landless farmer billionaire pay the same tax when they buy the same the market

22. #22UKPSC 2021
    Which of the following taxes are abolished by the Goods and Service Tax?
    • AProperty Tax
    • BCorporation Tax
    • CValue Added Tax
    • DIncome Tax
    Answer: (C) Value Added Tax
    Explanation

    Option c is the correct Goods and Services Tax (GST) is a successor to Tax (VAT) used in India on the supply of goods Goods and Service Tax (GST) is a tax that subsumes most of the indirect taxes prevalent in India including central excise tax, additional customs duty, surcharges, added tax and Octroi. Ptoperty Tax, and Income Tax are direct taxes and continue to of the GST. ] Important Tips Central Indirect taxes subsumed under GST: Service Tax Central Excise duty Additional Excise duties Additional Customs Duty, also known as Countervailing Duty (CVD) Special Additional Duty of Customs (SAD) Central Sales Tax (CST) Surcharges Central CESS State Indirect taxes subsumed under GST: Value Added Tax (VAT) Sales tax Entertainment tax not including entertainment tax levied by local bodies Luxury tax Entry tax Taxes on lotteries, betting, and gambling State CESS and Surcharge Octroi

23. #23UPSC CDS 2021
    The increases in private investment spending induced by the increase in Government spending is known as
    • ACrowding in
    • BDeficit financing
    • CCrowding out
    • DPumping out
    Answer: (A) Crowding in
    Explanation

    Option a is the correct in refers to the phenomenon where an government spending leads to an increase in spending. When the government spending, it can create a positive impact on the Th is can result in increased demand for goods which can, in turn, encourage private invest more in order to meet the higher demand. private investment spending is said to be by the initial government spending. Important Tips: Deficit financing refers to a situation where the government funds its spending by borrowing money, typically by issuing bonds or taking loans. This can lead to an increase in the budget deficit if government expenditures exceed revenues. Crowding out is the opposite concept of crowding in. It occurs when increased government spending leads to a decrease in private investment spending

24. #24UPSC CDS 2021
    The excess of total expenditure of Government over its total receipts, excluding borrowings, is known as
    • APrimary deficit
    • BFiscal deficit
    • CCurrent delict
    • DCapital deficit
    Answer: (B) Fiscal deficit
    Explanation

    Option b is the correct Deficit is the difference behveen the total income government (total taxes and non -deht capital its total expenditure. A recurring high fi scal that the government bas been spending b eyond Deficit Total expenditure of the and revenue expenditure) - Total income of (Revenue receipts recovery of

25. #25UPSC CDS 2018
    Consider the following statements about the impact of tax. 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand.Which of the given above is/are correct?
    • AOnly 1
    • BOnly 2
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct l is correct- When demand is inelastic are less responsive to price changes), a tax shifted forward to consumers. In this case, producers on the burden of the tax to consumers by price of the goods or services Statement 2 is correct- When supply is relatively than demand, a tax burden can be to producers. In this scenario, producers a larger portion of the tax burden because they flexibility to reduce the quantity supplied cost implications

26. #26Previous year
    The proceeds from disinvestment are included as? (CAPF 2022
    • Anon-tax revenue
    • Brevenue receipts
    • Ccapital receipts
    • Dtax revenue
    Answer: (C) capital receipts
    Explanation

    Option c is the correct or divestment is when the government assets or a subsidiary, such as a Central or State enterprise. All those receipts of the government liability or assets are termed as capital receipts. consist of capital receipts and non-debt Disinvestment proceeds comes under receipts (NDCR) Important Tips Minority disinvestment, majority disinvestment, and complete privatisation are the three main approaches to disinvestment. The Union Finance Ministry has a separate department for undertaking disinvestment-related procedures called the Department of Investment and Public Asset Management (DIPAM) The government may disinvest in order to reduce the fiscal burden or bridge the revenue shortfall for that year. It also uses disinvestment proceeds to finance the fiscal deficit, to invest in the economy and development or social sector programmes, and to retire government debt

27. #27UPSC CAPF 2021
    Which one of the following functions as an automatic stabilizer in the context of fiscal and monetary policies of an economy?
    • APersonal income tax
    • BReverse repo rate of bank
    • COpen market operation
    • DBond price
    Answer: (A) Personal income tax
    Explanation

    Option a is the correct an stabilizers are a type of fiscal policy offset fluctuations in a nation's economic their normal operation without additional, by the government or policymakers. The best known automatic stabilizers are progressively and personal income taxes, and transfer as unemployment insurance and welfare. are called this because they act to cycles and are automatically triggered government action

28. #28UPSC CSE Prelims 2011
    The lowering of Bank Rate by the Reserve Bank of India leads to
    • AMore liquidity in the market
    • BLess liquidity in the market
    • CNo change in the liquidity in the market
    • DMobilization of more deposits by commercial banks
    Answer: (B) Less liquidity in the market
    Explanation

    Option b is the correct progressive tax structure is one in which the tax as income increases. This means that high income earners pay a higher percentage of their income than low-income earners. Progressive tax designed to ensure that everyone contributes to the in proportion to their ability to pay. Important Tips: Regressive vs. Proportional vs. Progressive Taxes: A regressive tax system levies the same percentage on products or goods purchased regardless of the buyer's income and is thought to be disproportionately difficult on low earners. A proportional tax applies the same tax rate to all individuals regardless of income. A progressive tax imposes a greater percentage of taxation on higher income levels, operating on the theory that high-income earners can afford to pay more

29. #29UPSC CSE Prelims 1998
    A consumer is said to be in equilibrium, if
    • Ahe is able to fulfil his need with a given level of income
    • Bhe is able to live in full comforts with a given level of income
    • Che can fulfil his needs without consumption of certain items
    • Dhe is able to locate new sources of income
    Answer: (A) he is able to fulfil his need with a given level of income
    Explanation

    Option a is the correct income is a broader national leve l than is personal income. National payments to individuals (in co me from and other income), plus parments to plus retained income from the undistributed profits), less government and consumer interest, and In n,n.e Nationnl income - undistributed a 1011 - payments for social security provisions tax government transfer pnyments payments Net interest paid by the personal income measures the persons and nonprofit corporations. is calc ulated personal tax and non tax payments from personal income. In 1999, disposable personal income rep re 72 percent of gross domestic product U.S. output)

30. #30UPSC CAPF 2016
    Which of the following are the objectives of the Khadi and Village Industries Commission 1. To provide employment in rural 2. To produce saleable articles. 3. To create self reliance amongst people and building up a strong rural comm.unity spirit.Select the correct answer using the code given below?
    • A1, 2 and 3
    • B1 and 2 only
    • C2 and 3 only
    • D1 and 3 only
    Answer: (A) 1, 2 and 3
    Explanation

    Option a is the correct objectives of the KVIC are explained Objective - To build up an active rural Objective - To provide empioyment in rural Objective - To produce a saleable Objective - To create self-reliance among weaker section Important Tips 0 _arid Village Commission i/ a? body which is under Parliament Act, passed by the Government of India. KVIC aims to plan, promote, facilitate, organize, and assist the establishment and development of and Village in the rural areas

31. #31UPSC CSE Prelims 2016
    In the context of which of the following do sometimes find the terms 'amber box, blue box and green box' in the news?
    • AWTO affairs
    • BSAARC affairs
    • CUNFCCC affairs
    • DIndia-EU negotiations on FTA
    Answer: (A) WTO affairs
    Explanation

    Option a is the correct WTO terminology, subsidies in general are identified which are given the colours of traffic lights: amber (slow down - i.e. be reduced), The Agriculture Agreement h as no Red Box. Important Tips Green Box: Permitted - Subsidy must cause no or at most cause minimal distortion. Amber Box: Reduce - All domestic support exceeding the reduction commitment level. Blue Box Subsidies that are tied to programmes that limit production

32. #32Practice set
    Which one of the following statements best describes the term 'Zombie firm' in the context of Indian economy?
    • AIt is a firm that does not conduct any managerial and profitable operations in the economy
    • BIt is a firm with lower than one interest coverage ratio, and are unable to meet their interest obligations from their income
    • CIt is a firm created to be sold to a person who wish to start a company without going through all the procedures of creating a new one
    • DIt is a firm engaged in tax planning strategies that exploit gaps and mismatches in tax rules to avoid paying tax
    Answer: (B) It is a firm with lower than one interest coverage ratio, and are unable to meet their interest obligations from their income
    Explanation

    Option b is the correct with an interest coverage ratio lower than one to meet their interest obligations from their are categorized as zombie Firms. It is a company that able to stay in business but is loaded with bad needs bailouts to survive

33. #33Practice set
    Which of the following was not one of the reasons behind the occurrence of 1991 economic crisis in India?
    • ALarge fiscal deficit was developed due to huge non-development expenditures
    • BCurrent account deficits were mainly financed by External borrowing
    • CMonetization of the fiscal deficits by RBI pushing India towards deflation
    • DInstead of generating revenue, Public Sector Undertakings became a liability for the government. 4 7
    Answer: (C) Monetization of the fiscal deficits by RBI pushing India towards deflation
    Explanation

    Option c is the correct for 1991 Economic a is correct. Huge Fiscal Deficit: fiscal deficit was getting worse due to huge nondevelopment expenditures. As a result, gross fiscal from of GDP to of GDP during 1980-81 a major portion of this deficit by borrowings (both from external and c is incorrect. High level of Inflation: The deficits forced the central government to monetise deficits by borrowings from RBI. RBI printed that pushed up the inflation level, thereby, domestic goods more expensive. The rate of from per annum to per annum during dis correct. Public Sector assigned the prime role of of inequality of income and poverty. But years witnessed the failure of PSUs to roles efficiently and effectively. Instead of revenue generator for the central government, liability. The sick PSUs an exlrn on the government's b is correct. Rise in External Debt: The led to rising fuel prices. The

34. #34Practice set
    Which of the following are the intended benefits of strategic disinvestment? 1. Meeting budgetary requirements. 2. Reduce fiscal burden. 3. Raise funds to finance growth and development projects. 4. Improve market competitiveness and discipline. 5. Transfer of commercial risks.Select the correct answer using the code given below
    • A2 and 3 only
    • B1, 2 and 3 only
    • C1, 2, 3 and 5 only
    • D1, 2, 3, 4 and 5
    Answer: (D) 1, 2, 3, 4 and 5
    Explanation

    Option d is the correct main objectives of strategic Disinvestment; To meet the budgetary needs. To reduce fiscal deficit. To improve public finances and overall economic efficiency To diversify the ownership of PSU for enhancing efficiency of individual enterprise To raise funds for technological upgradation, modernization and expansion of PSUs To introduce, competition and market discipline To fund growth and development programmes To encourage wider share of ownership To depoliticise non-essential services Transfer of Commercial Risks Important Tips Disinvestment means sale or liquidation of assets by the government, usually in Central and state public sector enterprises, projects, or other fixed assets. Strategic disinvestment imply the sale of substantial portion of Government shareholding of u central public sector enterprise (CPSE) of upto or such higher percentage as the comptent

35. #35Practice set
    An Isoquant curve shows combinations of
    • Aincome and inequalities
    • Binflation and unemployment
    • Ctax rates and the amount of tax revenue collected
    • Dcapital and labour
    Answer: (D) capital and labour
    Explanation

    Option d is the correct isoquant curve is a concave-shaped line on a graph, the study of microeconomics, that charts all the factors, that produce a specified level of output. This used as a metric for the influence that the inputs capital and labour have on the obtainable output or production

36. #36Practice set
    Which of the following items will not be taken into consideration during the calculation of Gross Domestic Product by the Expenditure Method? Practiceb o o k 1. Net increase in Inventory of businesses 2. Household expenditure on services 3. Government expenditure on public goods services 4. Brokerage paid for the transfer of shares 5. Transfer Payments made by the Government 6. Import of agricultural commoditiesSelect the correct answer using the code given below
    • A2, 3 and 6 only
    • B1, 4 and 5 only
    • C4 and 5 only
    • D5 only 7 4
    Answer: (D) 5 only 7 4
    Explanation

    Option dis the correct 1 is incorrect: An increase in Inventory (goods/ stocked for production/ sale later) is a form of Capital Formation, i.e. Investment by a it will be included under the 'I' head of the 2 h im.u.ued: on various services (example - paying plumbers and movie tickets, booking cabs, etc) is one of the activities in a nation. It is included under the of the 3 is incorrect: The expenses incurred by to provide public good and services (buying materials, hiring labour, etc), free (constructing school buildings, paying salaries etc) all would be included under the head of and hence included in calculation of 4 is incorrect: When assets such as bonds are procured, it signifies a change in does not affect the value of goods and services; transactions are not involved in expense the brokerage paid for the transfer of shares while using the expenditure 5 is correct: Transfer Paym

37. #37Practice set
    Consider the following statements with reference to the concept of Market price and Factor cost used in relation to the estimation of Gross Domestic Product (GDP): 1. GDP at Market price is always greater than GDP at Factor cost. 2. At present, GDP of India is calculated at factor cost only.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (D) Neither 1 nor 2
    Explanation

    Option d is the correct cost is the cost of factors of production or the of inputs, whereas the market price is the final the product being sold, which includes indirect taxes 1 is incorrect: Theorelically, GDP at can be more, equal or lesser than GDP at Factor to find out Market Prices (MP), indirect taxes and subsidies are subtracted from Factor Cost short, MP includes net indirect tax whereas FC does PC becomes MP when net indirect taxes are added In the of indirect taxes and subsidies, MP are the Factor Cost Indirect Taxes - 2 is incorrect: At present, GDP in India at market prices (not factor cost) while GVA at basic prices (not market price). In its January 2015, the Central Statistics Office ( CSO) at factor cost with the GVA at basic prices, and at market prices (which is now called at basic prices GVA at factor cost less Production at market prices GVA at bask prices Important T

38. #38Practice set
    Consider the following statements: 1. Personal income is the income actually received by the individual households from all sources in the form of current transfer payment and factor incomes. 2. Personal disposable income is the amount available to the households and the non corporate businesses after the deduction of all tax obligations to the government. 3. National Disposable Income (NDI) is the maximum, the country can afford to spend on consumption of goods or services during an accounting year.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (C) All three
    Explanation

    Option c is the correct 1 is correct. Personal income is the received by the individual households from in the form of current transfer payment and Personal income refers to total earnings an individual from investments, salaries, pensions, social benefits, and other ventures given Income Private Income - Corporation Tax Earnings or Corporate 2 is correct. Personal disposable income is which is actually available to the households non-corporate businesses after the deduction of all to the Disposable Income Personal Income - 3 is correct. National Disposable Income defined as the maximum, the country can afford to consumption of goods or services during an without having to finance its expenditure by assets or by increasing its liabilities. National Disposable Income NNPFC Net Net Current Transfers from Rest of the World

39. #39Practice set
    The Factor cost of a good which of the following? 1. Payments for raw materials. 2. Wages to labour for production. 3. Taxes.Select the correct answer using the code given below
    • A1 only
    • B1 and 2 only
    • C1, 2 and 3
    • D1 and 3 only
    Answer: (B) 1 and 2 only
    Explanation

    Option bis the correct cost includes the payment to factors of labour and capital entrepreneurshi It does any tax. Thus, factor cost of a good will for raw materials and Wages to labour order to arrive at the market prices, we have to add to cost the total indirect taxes less total subsidies. Important Tips The basic prices lie in between: they include the production taxes (less production subsidies) but not product taxes (less product subsidies). Therefore, in order to arrive at market prices we have to add product taxes (less product subsidies) to the basic prices. In India, CSO uses GVA at basic prices as a measure of national income

40. #40Practice set
    Which of the following statements regarding Purchasing Power Parity (PPP) is correct?
    • APPP based exchange rates are preferable when financial flows are involved between nations
    • BWhile the World Hank uses PPP rates to determine weights in its regional and global aggregations of real GDP, IMF uses market-based rates
    • CThe PPP rates are much easier to calculate than the other exchange rates specifically the market-based rates
    • DPPP exchange rates are relatively stable over time whereas market exchange rates are more volatile
    Answer: (D) PPP exchange rates are relatively stable over time whereas market exchange rates are more volatile
    Explanation

    Option d is the correct l is incorrect. ULBs (Urban local bodies) power to raise revenue through taxes such as land tax or through non-tax sources which include user-fees. These come under the category of of 2 is incorrect. Studies show that around to 95 percent of revenue is obtained from particularly state and central government loans 3 is incorrect. ULBs (Urban local raise loans directly from capital market, the central and state governments, For example municipal bonds. Important Tips External revenue sources include

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