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IAS Prelims Exam: Economic Survey 2015-16 Questions: Bounty for the Well off

Mar 17, 2016 16:16 IST

    In the Civil Services IAS Exam, the questions of GS Indian Economy play a crucial role for the aspirants to crack the IAS Exam. In the past few years the relevance of questions based on Indian Economy has been increased in IAS Prelims Exam while there is always a greater possibility of asking many more questions. So, an aspirant should have to be prepared for such questions based on Indian Economy.

    Here, we have provided Multiple Choice Questions based on the very first chapter of Economic Survey 2015-16: Bounty for the Well off

    Q1. Which of the following committees has submitted its recommendations on the possible tax rate under GST?
    A.    TSR Subramanian Committee
    B.    Dr Arvind Subramanian Committee
    C.    Rangrajan Committee
    D.    Vimal Jala Committee

    Answer: B

    Explanation:
    Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian on Possible Tax rates under GST submits its Report to the Finance Minister; On the Revenue Neutral Rate (RNR), the Committee recommends the same in the range between 15 percent and 15.5 percent (Centre and states combined) with a preference for the lower end of that range based on the analysis made in the Report.

    Q2. Consider the following statements regarding small savings in India:

    I.    “Small” savings schemes were initially created to mobilise saving by encouraging “small earners” to save, and offered above market deposit rates in accessible locations like post offices for this purpose.
    II.    small savings schemes offer high and fixed deposit rates (within year) and compete with banks, it is difficult for banks to reduce their own deposit rates and hence pass on policy rate cuts to consumers in form of lower lending rates.
    III.    The government has reduced rates on some small savings schemes to make them more responsive to market conditions.

    Which of the following statement(s) is/are correct?
    A.    Only I
    B.    I and II
    C.    I and III
    D.    All of the above

    Answer: D

    Explanation:
    “Small” savings schemes were initially created to mobilise saving by encouraging “small earners” to save, and offered above market deposit rates in accessible locations like post offices for this purpose. Recent discussions have focused on one efficiency cost of “small” savings schemes – how they hinder monetary policy transmission. Because small savings schemes offer high and fixed deposit rates (within year) and compete with banks, it is difficult for banks to reduce their own deposit rates and hence pass on policy rate cuts to consumers in form of lower lending rates. Recently, the government has reduced rates on some small savings schemes to make them more responsive to market conditions.

    Q3. Which among the following companies is not a Public Sector Companies in India?
    A.    IRCL
    B.    IIFCL
    C.    Hindustan Zinc
    D.    PFC

    Answer: C

    Explanation:
    The government-owned corporations are termed as Public Sector Undertakings (PSUs) in India. In a PSU majority (51% or more) of the paid up share capital is held by central government or by any state government or partly by the central governments and partly by one or more state governments. Hindustan Zinc is Private Sector Company in India.

    Q4. Merit goods and services are:
    A.    Merit goods are those goods and services that the government feels that people will over-consume, and which ought to be taxed at the point of use so that over consumption does not happened by well of households.
    B.    Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service.
    C.    A good which harms the consumer, for example, people don’t realise or ignore the costs of doing something e.g. smoking, drugs.
    D.    Those goods and services which have negative externalities.

    Answer: B

    Explanation:
    Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service. Both the state and private sector provide merit goods & services. We have an independent education system and people can buy private health care insurance.

    Q5. Consider the following statements regarding Demerit goods:
    I.    Demerit goods harm the consumer, for example, people don’t realise or ignore the costs of doing something e.g. smoking, drugs.
    II.    Usually, Demerit goods have negative externalities.
    III.    Usually, Demerit goods have positive externalities.

    Which of the following statement(s) is/are correct?
    A.    Only I
    B.    I and II
    C.    I and III
    D.    All of the above

    Answer: B

    Explanation:
    Merit and Demerit goods involve making a value judgement that something is good or bad for you. Examples of Demerit goods are smoking, drinking, takings drugs etc.

    Q6. Which of the following statements is incorrect regarding the nature of subsidies?
    A.    Implicit subsidies include utilization of such techniques as exchange rate manipulation, price controls, and quantitative restrictions on trade, as well as other methods of manipulating the terms of trade either for or against farmers.
    B.    Explicit agricultural subsidies include such programmes as government purchases of agricultural surpluses and government payments to farmers to keep land idle.
    C.    In case of explicit subsidy, there are governmental budgetary outlays while in case of implicit subsidy, supply prices are suppressed.
    D.    In case of implicit subsidy, there are governmental budgetary outlays while in case of explicit subsidy, supply prices are suppressed.

    Answer: D

    Explanation:
    Generally, the Subsidies are government policies in aid of one or more industries, usually carrying a financial benefit to the industry. At the most conventional level, subsidies are government financial transfers to an industry, through payments to workers or to firms. Probably nobody would deny that the government is subsidizing the industry if it is paying part of the wages of workers in the industry or it is granting firms in the industry funds to make capital purchases. This is the narrowest definition of a subsidy.

    Q7. The demerit goods should be taxed at
    A.    Higher rate
    B.    Lower rate
    C.    Tax free
    D.    Subsidised

    Answer: A

    Explanation:
    The demerit goods should be taxed at high rate while in case of merit goods, tax should be at lower rate. Goods that account for a large share of expenditures of poorer households, such as food, will typically be merit goods, and should therefore be taxed at low rates, made exempt from taxation, or even subsidized.

    Q8. What is Revenue Neutral Rate?
    A.    Taxing procedure that allows the government to still receive the same amount of money despite changes in tax laws.
    B.    Taxing procedure that allows the government to still receive the higher amount of money despite no changes in tax laws.
    C.    Taxing procedure that allows the government to receive the lower amount of money despite changes in tax laws.
    D.    Taxing procedure that allows the government to receive the higher amount of money despite no changes in tax laws.

    Answer: A

    Explanation:
    Taxing procedure that allows the government to still receive the same amount of money despite changes in tax laws. The government may lower taxes for one particular group of people, but raise taxes for another group. This allows the revenue that they receive to remain unchanged (neutral).

    Q9. Consider the following statement regarding the New Pension Scheme (NPS):
    I.    The minimum investment limit per year under NPS Tier-I account is Rs 6000/-.
    II.    The Non-resident Indians (NRIs) are also allowed to invest in NPS.

    Which of the following statement(s) is/are correct?
    A.    Only I
    B.    Only II
    C.    Both of I and II
    D.    None of the above

    Answer: C

    Explanation:
    Reserve Bank of India (RBI) has allowed Non-resident Indians (NRIs) to invest in the National Pension System (NPS), under Foreign Exchange Management Act. The subscription amounts shall be paid by NRIs by inward remittance through normal banking channels or out of funds held in their non-resident external, foreign currency non-repatriable, or non-resident ordinary (NRO) accounts. There shall be no restriction on repatriation of the annuity or accumulated savings. Presently, the minimum investment limit per year under NPS Tier-I account is Rs 6000/-.

    Click here for the Economy Study Material

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