Indian Economy MCQs
Indian Economy Multiple Choice Questions (MCQs) for State and UPSC Civil Services Examinations. Objective Questions on Indian Economy for competitive examinations.
31. A term “stocks” was in news with reference to the climate change negotiations. What does “stocks “mean in this regard?
[A] Cumulative Forest and Biodiversity resources of a country
[B] Cumulative Forest and Biodiversity resources of entire earth
[C] Emissions accumulated in the atmosphere so far
[D] Semi-discrete subpopulations of a particular species in an ecosystem
Show Answer
Correct Answer: C [ Emissions accumulated in the atmosphere so far ]
Notes:
Stocks refer to the emissions accumulated in the atmosphere so far.
32. With reference to the CTS 2010 (cheque truncation system), consider the following statements:
1. CTS 2010 provides faster, more secure and more cost effective clearing of cheques
2. CTS cheques are payable at par at all branches of the originating bank
Which among the above statements is / are correct ?
[A] Only 1
[B] Only 2
[C] Both 1 & 2
[D] Neither 1 nor 2
Show Answer
Correct Answer: C [ Both 1 & 2 ]
Notes:
33. Which among the following operate under the aegis of International Monetary Fund?
1.Financial Transaction Plan
2.Technical Assistance Special Fund
3.Financial Stability Board
Choose the correct option from the codes given below:
[A] Only 1
[B] Only 1 & 3
[C] Only 2 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: A [ Only 1 ]
Notes:
34. The components of India’s Foreign Exchange Reserves include:
1. Foreign exchange
2. Gold
3. Special Drawing Rights (SDRs)
4. International Monetary Fund (IMF) reserve position
5. GOI Bonds issued overseas
Choose the correct option from the codes given below:
[A] Only 1, 2, 3 & 4
[B] Only 1, 2, 4 & 5
[C] Only 1, 2 & 3
[D] 1, 2, 3, 4 & 5
Show Answer
Correct Answer: A [ Only 1, 2, 3 & 4 ]
Notes:
35. To curb the revenue deficit, one should advise the government to__:
- cut expenditures on subsidy
- cut social expenditures
- impose import controls
Choose the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 1
[C] Only 2 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: A [ Only 1 & 2 ]
Notes:
The government can curb the revenue deficit either by increasing revenue receipts or by decreasing revenue expenditure. Revenue expenditure can but reduced by a cut in social expenditures and subsidies. Since both ways have their own economic and political ramifications, government could never achieve what it was supposed to achieve as per the FRBM act. The FRBM act had mandated the government to eliminate revenue deficit by March 2008 (it was later shifted to March 2009). It has never been achieved. The act also mandates the government to place the three separate documents along with Budget documents viz. Macro-Economic Framework Statement, Medium-Term Fiscal Policy Statement and Fiscal Policy Strategy Statement. These statements every time reiterate the government vow to achieve FRBM targets.
36. With reference to Banking, which among the following is / are correct statements about Demand Deposits?
1. Money in demand deposits is liquid
2. All demand deposits earn interest
3. Ownership of demand deposits can be transferred using a cheque
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 1 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: C [ Only 1 & 3 ]
Notes:
The money as demand deposit is liquid and can be encashed at any time. The ownership of demand deposits can be transferred from one person to another via cheques or electronic transfers. There is no fixed term to maturity for Demand Deposits. The demand deposits may or may not pay interest to the depositor. For example, while we get an interest on savings accounts; no interest is paid on current accounts.
37. Which of the following is / are methods of tax avoidance?
- Share buyback
- Round Tripping
- Profit Shifting
- Debt dumping
Select the correct option from the codes given below:
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 2, 3 & 4
[D] 1, 2, 3 & 4
Show Answer
Correct Answer: D [ 1, 2, 3 & 4 ]
Notes:
Avoidance means an attempt to reduce tax liability through legal means. Tax evasion is illegal means to reduce tax liabilities. Methods of tax evasion are falsification of books, suppression of income, overstatement of deductions, etc. Meaning of various terms related to tax avoidance is as follows:
Tax Havens
Route profits through subsidiaries located in tax havens.
No Repatriation of Profits
Companies headquartered in the US give a declaration to the tax a authorities there to not repatriate non-US profits, avoiding tax in their home country
Transfer Pricing
Use transfer pricing to allocate expenses to high-tax countries and profits to low-tax countries
Round Tripping
Commonly used for intellectual property rights. For example, US parent sells patent to its subsidiary in Netherlands, a low-tax country. The Dutch subsidiary received royalty payment from the US parent.
Share Buyback
Parent invests in Indian company through Mauritius. Since dividends are taxed in India, the Indian company buys back the shares. Profits are repatriated to Mauritius, where capital gains tax is zero.
Treaty Shopping
In Treaty shopping, a resident of a third country invests by taking advantage of a fiscal treaty between India and another contracting state. This has greatly contributed in encouraging FDI in the country but has been a medium of tax evasion.
Profit Shifting
Allocation of income and expenses between related corporations or branches of the same legal entity (e.g. by using transfer pricing) in order to reduce the overall tax liability of the group or corporation.
Debt Dumping
Transferring a bad debt to a group company located in a higher-tax rate country in order to write off the debt in that.
38. Central Employment Guarantee Council (CEGC):
1. is the apex body under the MGNREGA
2. is headed by the Minister of Labour and Employment
3. works as MGNREGA watchdog
Which among the above statements is/ are correct?
[A] Only 1 & 2
[B] Only 2 & 3
[C] Only 1 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: C [ Only 1 & 3 ]
Notes:
Central Employment Guarantee Council (CEGC) has been provided under Mahatma Gandhi NREGA under Section 10(3) (d) of the said act. The tenure of the members is 1 year and Rural Development minister chairs its meeting. It is responsible for a central monitoring and evaluation system in MGNREGA. Also note that for last three years, this body is just in papers only. Last CEGC was notified on June 2011 and its term ended next year. After that, nothing was done in this direction.
39. With respect to the ‘shares’ of a company, which of the following statements is/are correct?
- A share is treated as a “Good” under Sale of Goods act
- A person who holds the share of a public limited company has right to transfer his / her shares
- A share makes a person owner of assets of company
Select the correct option from the codes given below:
[A] Only 1
[B] Only 1 & 2
[C] Only 2 & 3
[D] 1, 2 & 3
Show Answer
Correct Answer: B [ Only 1 & 2 ]
Notes:
A member who holds the shares of a company does not imply that the member owns any of the company’s assets. This is because assets would be still possessed by the company which is a legal person in itself. However, if the company is wound up, after selling its assets, the shareholder has the right to participate in the assets after the debts have been paid. This means that it is the right to what assets remain after liquidation.
40. Which of the following is the correct definition of ‘Effective Revenue Deficit’?
[A] difference between revenue deficit and grants for creation of capital assets
[B] difference between revenue deficit and interest liabilities of the Government
[C] difference between fiscal receipt and net expenditure of the government
[D] difference between fiscal receipt and money spent on various social services
Show Answer
Correct Answer: A [ difference between revenue deficit and grants for creation of capital assets ]
Notes:
Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. According to the Interim Budget 2014-15 documents, the Effective revenue deficit is 2.2 % of the GDP and the government projects it to be 1.8% of GDP in fiscal year 2014-15.
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