Every Book Back multiple-choice question from Fiscal Economics (12th Standard Economics, Samacheer Kalvi) — each with the correct option highlighted and a clear, worked explanation. Free to read in English and Tamil.
Q1
The modern state is ____________.
- A. Laissez-faire state
- B. Aristocratic state
- C. Welfare stateCorrect
- D. Police state
Explanation. The modern state has transitioned from a mere regulatory or police state into a welfare state that actively promotes economic and social well-being.
Q2
One of the following is NOT a feature of private finance:
- A. Balancing of income and expenditure
- B. Secrecy
- C. Saving some part of income
- D. PublicityCorrect
Explanation. Unlike public finance, which is subject to public disclosure and legislative debate, private finance maintains strict secrecy regarding its financial accounts.
Q3
A tax possesses which of the following characteristics?
- A. Compulsory payment
- B. No direct quid pro quo
- C. Failure to pay is a punishable offence
- D. All the aboveCorrect
Explanation. A tax is a compulsory levy by public authorities, has no direct return benefit, and failure to pay is legally punishable.
Q4
Which of the following canons of taxation was NOT listed by Adam Smith?
- A. Canon of equality
- B. Canon of certainty
- C. Canon of convenience
- D. Canon of simplicityCorrect
Explanation. Adam Smith propounded four core canons of taxation: equality, certainty, convenience, and economy. The canon of simplicity was not part of his list.
Q5
Consider the following statements and identify the correct ones.
i. Central government does not have exclusive power to impose tax which is not mentioned in state or concurrent list.
ii. The Constitution also provides for transferring certain tax revenues from union list to states.
- A. i only
- B. ii onlyCorrect
- C. Both i and ii
- D. None of the above
Explanation. Statement i is incorrect because the Centre holds residuary powers. Statement ii is correct as the Constitution provides for sharing certain union tax proceeds with states.
Q6
GST is the equivalent of ____________.
- A. Sales taxCorrect
- B. Corporation tax
- C. Income tax
- D. Local tax
Explanation. GST is a comprehensive, multi-stage, destination-based indirect tax that replaced sales tax, VAT, and several other indirect taxes in India.
Q7
A direct tax has the following merits EXCEPT ___________.
- A. Equity
- B. ConvenienceCorrect
- C. Certainty
- D. Civic consciousness
Explanation. Direct taxes are often inconvenient as taxpayers are required to maintain detailed accounts, file complex returns, and pay the tax in lump sums.
Q8
Which of the following is a direct tax?
- A. Excise duty
- B. Income taxCorrect
- C. Customs duty
- D. Service tax
Explanation. Income tax is a direct tax because it is levied on a person's income and wealth and its burden cannot be shifted to another.
Q9
Which of the following is NOT a tax under the Union list?
- A. Personal Income Tax
- B. Corporation Tax
- C. Agricultural Income TaxCorrect
- D. Excise duty
Explanation. Agricultural income tax is under the jurisdiction of state governments and is explicitly listed as a state source of revenue.
Q10
Revenue receipts of the government do NOT include ___________.
- A. Interest
- B. Profits and dividends
- C. Recoveries and loans
- D. Rent from propertyCorrect
Explanation. Recoveries of loans and borrowings are capital receipts, whereas interest, profits, and rents are classified as revenue receipts.
Q11
The difference between revenue expenditure and revenue receipts is called ___________.
- A. Revenue deficitCorrect
- B. Fiscal deficit
- C. Budget deficit
- D. Primary deficit
Explanation. Revenue deficit is defined specifically as the excess of the government's revenue expenditure over its revenue receipts.
Q12
The difference between total expenditure and total receipts including loans and other liabilities is called ___________ (Note: Typographical error in textbook, conceptually refers to 'excluding borrowings').
- A. Fiscal deficitCorrect
- B. Budget deficit
- C. Primary deficit
- D. Revenue deficit
Explanation. Fiscal deficit is defined as total expenditure minus total receipts excluding borrowings. The textbook's use of 'including' is a typographical error.
Q13
The primary purpose of deficit financing is ___________.
- A. Economic developmentCorrect
- B. Economic stability
- C. Economic equality
- D. Employment generation
Explanation. Deficit financing is primarily resorted to in developing countries to finance large development projects and economic growth outlays.
Q14
Deficit budget means ____________
- A. An excess of government's revenue over expenditure
- B. An excess of government's current expenditure over its current revenue
- C. An excess of government's total expenditure over its total revenueCorrect
- D. None of the above
Explanation. A deficit budget occurs when the government's estimated total expenditure is greater than its anticipated total revenue.
Q15
Which of the following is a method of repayment of public debt?
- A. Conversion
- B. Sinking fund
- C. Funded debt
- D. All theseCorrect
Explanation. Sinking funds, debt conversion, and funding debt are all recognized, standard methods used by governments to repay public debt obligations.
Q16
Conversion of public debt means exchange of
- A. new bonds for the old ones
- B. low interest bonds for higher interest bondsCorrect
- C. Long term bonds for short term bonds
- D. All the above
Explanation. Conversion of public debt involves converting high interest loans into low interest loans, which is achieved by exchanging old bonds for new ones.
Q17
The word budget has been derived from the French word "bougette" which means
- A. A small bagCorrect
- B. An empty box
- C. A box with papers
- D. None of the above
Explanation. The term budget originates from the French word 'bougette', which historically refers to a small leather bag or public purse.
Q18
Which one of the following deficits does not consider borrowing as a receipt?
- A. Revenue deficit
- B. Budgetary deficit
- C. Fiscal deficitCorrect
- D. Primary deficit
Explanation. Fiscal deficit is calculated as the difference between total expenditure and total receipts excluding borrowings, meaning it does not treat borrowing as revenue.
Q19
Finance Commission determines
- A. The finances of Government of India
- B. The resources transfer to the statesCorrect
- C. The resources transfer to the various departments
- D. None of the above
Explanation. The primary function of the Finance Commission of India is to recommend the distribution and transfer of financial resources between the Centre and the states.
Q20
Consider the following statements and identify the right ones.
i. The finance commission is appointed by the President
ii. The tenure of Finance commission is five years
- A. i only
- B. ii only
- C. bothCorrect
- D. none
Explanation. Under Article 280 of the Indian Constitution, the Finance Commission is appointed by the President of India and is set up every five years.
