Annexure 4

OTHERS ECONOMICS MULTIPLE CHOICE QUESTIONS

1. Scope of public finance includes :

(a) Public revenue (b) Public debt (c) Public expenditure (d) All of these
2. Public Authorities Include:
(a) Central Government (b) State Government (c) Local Government (d) All of these
3. Which is the main point on the basis of which public finance can be separated from
private finance:
(a) Price policy (b) Borrowings (c) Secrecy (d) Elasticity in income
4. The principle of Maximum Social Advantage have been suggested by
(a) Pigou (b) Dalton (c) Musgrave (d) Adam Smith
5. In the following which is the characterstic of a tax
(a) Compulsory (b) optional (c) forced (d) nationality
6. Which is the main objective of a tax:
(a) Increase in consumption (b) increase in production (c) Raising public revenue (d)
reduction in capital formation
7. Among the following canons of taxation which one has been given by Adam Smith:
(a) Canon of Uniformity (b) Canon of productivity (c) canon of diversity (d) canon of
equity
8. The Indian tax system is:
(a) Proportional (b) Progressive (c) Regressive (d) Degressive
9. The burden of direct taxes is borne by :
(a) Rich person (b) poor person (c) on whom it is levied (d) none of these
10. Indirect taxes have an element of :
(a) Equitable (b) certainity (c) economical (d) encourage honesty
11. Direct taxes have the element of :
(a) Evasion (b) convenient (c) progressive (d) economy
12. In proportional tax system, the rates of tax remain:
(a) Constant (B) increasing (c) decreasing (d) zero
13. Expenditure Tax for India was recommended by:
(a) Kaldor (b) Colin Clarke (c) Adam Smith (d) Adolph Wagnor
14. Corporate Income tax is the tax levied on:
(a) Corporations (b) Municipalities (c) Co –operative societies (d) Companies
15. Which of the following is the major source of revenue in India:
(a) Direct tax (b) Capital Levy (c) Grants in aid (d) Indirect tax
16. Which of the following is not a Commodity Tax:
(a) Excise duty (b) Customs Duty (c) Coporation Tax (d) Octroi
17. A duty levied on goods when they entering a town
(a) Income tax (b) Octroi (c) Agricultural tax (d) Professional tax
18. Special Assessment means:
(a) A tax on special benefits (b) General tax on all people (c) A periodical tax (d) Gift tax
19. Non-exclusion principle is related to:
(a) Private goods (b) Public goods (c) Merit goods (d) Mixed goods
20. Education is an example of:
(a) Public good (b) Merit good (c) Social good (d) Club good
21. Public Goods are:
(a) Excludable (b) Non – excludable (c) Marketable (d) All of these

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 22. Who is the father of Public Finance:
(a) Dalton (b) Pigou (c) Smith (d) Musgrave
23. Incidence of tax means:
(a) Direct money burden (b) indirect money burden (c) actual tax burden (d) none of
these
24. Which is the tax shifting
(a) To bear the tax burden himself (b) to shift the tax burden on others 9c) to bear some
part of the tax himself and shift the rest on others (d) none of these
25. The equity principle of taxation was propounded by:
A) Adam Smith B) Dalton C) J.B. Say D) Marshall
26. “The government which taxes the least is the best”, is the belief of:
A) Mercantilists B) Physiocrates C) Modern D) Classical
27. According to Laffer, when the tax rate is 100 per cent , the tax revenuewill be:
A) 100% B) 50% C) Zero D) 10%
28. Incidence of a tax refers to the-------------burden of tax:
A) Initial B) Ultimate C) Intermediate D) None
29. In the case of regressive tax, the rate of tax---------------------as income increases:
A) increases B)remains constant C) Decreases D) None
30. Advolorum duties are levied on:
A) Length B) Weight C) Utilities D) Value
31. Tax avoidance is:
A) Illegitimate B) Legitimate C) Punishable D) None
32. The VAT was first introduced in:
A) India B) Britain C) USA D) France
33. Customs duties are imposed on commodities as they cross:
A) State boundaries B) District boundaries C) National boundaries D) Muncipal
boundaries
34. Contra-cyclical fiscal policy was popularised by:
A) Adam Smith B) Dalton C) J.B. Say D) Keynes
35. Deficit financing as a tool of fiscal policy was suggested by:
A) Keynes B) Dalton C) J.B. Say D) Marshall
36. Keynes popularised:
A) Monetary policy B) Fiscal Policy C) Income policy D) Price policy
37. A budget where there is excess of expenditure over revenue is called:
A) Surplus B) Deficit C) Balanced D) Zero-based
38. The balanced budget principle was advocated by:
A) Keynesians B) Mercantilists C) Classical school D) Neo-Classical school
39. Which one of the following is not a tax base?
A) Income B) wealth C) Utility D) Consumption
40. Equals treated equally in taxation leads to:
A) Vertical equity B) Real equity C) Horizontal equity D) None
41. Which one of the following is not a public utility?
A) Electricity B) Water supply C) Gas service D) Tourism
42. The largest component of revenue expenditure in India is:
A) Pension B) Interest payments C) Education D) Health
43. The Classical economists asserted that public expenditure is:
A) Unproductive B) Productive C) stagnant D) All of these
44. Wagner’s Law is related to:

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 A) Public revenue B) Public expenditure C) Public debt D) Budget
45. The largest component of revenue expenditure in India is:
A) Pension B) Interest payments C) Education D) Health
46. .Adolph Wagner was a-----------------Economist:
A) French B) German C) Indian D) American
47. Who is the exponent of Law of Increasing State Activities?
A) Dalton B) Pigou C) Smith D) Wagner
48. The Displacement effect hypothesis was formulated by:
A) Peacock and Wiseman B) Pigou C) Smith D) Musgrave
49. The financial year in India starts from:
A) 1st January B) 31st March C) 1st April D) 1st July
50. Salaries and pensions paid by governments are called:
A) Capital expenditure B) Development expenditure C) Revenue expenditure D)Plan
expenditure
51. The fiscal deficit excluding the interest liabilities for a year is called as
A) Revenue deficit B) Capital deficit C) Budget deficit D) Primary deficit
52. The FRBM Act was passed in:
A) 1991 B) 2001 C) 2003 D) 2011
53. The Zero-based budgeting was first adopted in:
A) India B) France C) Germany D) USA
54. Who proposed the Zero-based budgeting for the first time:
A) David Ricardo B) Alfred marshall C) Adam Smith D) Peter Phyrr
55. Gender budgeting started in India with the Union budget of:
A) 1991-92 B) 2001-02 C) 2006-07 D) 2010-11
56. Grants recommended by the Finance Commission are known as:
A) Plan grants B) Conditional Grants C) Statutory grants D) Conditional grants
57. Which one of the following is not a method for redeeming public debt?
A) Sinking fund B) Capital levy C) Terminal annuities D)Grants in aid
58. The Finance Commission in India is appointed by:
A) President B) Prime Minister C) Chief Minister D) Finance Minister
59. The Theory of Maximum Social Advantage was given by:
A) Marshal B) Dalton C) Musgrave D) Mill
60. Which of the following is a Statutory Body?
A) Finance Commission B) Planning Commission C) State Planning Board D) None of
these
61. Author of ‘General Theory of Employment, Interest and Money’:
A) Dalton B) Marshal C) Keynes D) Musgrave
62. Functional Finance concept was introduced by:
A) Marx and Angels B) Keynes and Lerner C) Dalton and Pigou D) J.S. Mill
63. Formation of---------------is the actual method of debt redemption:
A) Sinking fund B) Capital levy C) Conversion D) Repudiation
64. Chairman of the first Finance Commission:
A) Chadha B) K.C. Neogi C) Santhanam D) Y.V. Chavan
65. Redemption of public debt means:
A) Repayment of debt B) Repayment of FDI C) Additional borrowing D) Deficit financing
66. The Annual Account of both the income and expenditure is called:
A) Plan B) Budget C) Manifesto D)Accounts
67. Equals treated equally in taxation leads to:

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 A) Vertical equity B) Real equity C) Horizontal equity D) None
68. Modified Value Added Tax was introduced in India in:
A) 1951 B) 1986 C) 1991 D) 1976
69. Agricultural Holding Tax was recommended by:
A) Adam Smith B) K.N. Raj C) Chelliah D) Marshall
70. The burden of long-term public debt fall on:
A) Present generation B)Past generation C) Future generation D) All
71. The Great Depression occurred during:
A) 1919-23 B) 1929-33 C) 1949-53 D) 1901-05
72. Pump Priming is related with:
A) Monetary policy B) Income policy C) Price policy D) Fiscal policy
73. Deficit financing may lead to:
A) Poverty B) Unemployment C) Inflation D) Deflation
74. The debts which the government promises to pay off at a specified date are called
A) Irredeemable debts B) Funded debts C) Redeemable debts D) unfunded debts
75. Short-period debts are called as:
A) Unfunded debts B)Funded debts C) Redeemable debts D) None
76. Unfunded debts are also known as
A) Funded debts B) Floating debts C) Irredeemable debts D) None
77. Treasury bills issued by the Government are in the nature of:
A) Funded debts B) Floating debts C) Irredeemable debts D) None
78. A tax that can be shifted is called:
A) Direct tax B) Progressive tax C) Indirect tax D) None
79. Service tax in India was introduced in:
A) 1991-92 B) 2001-02 C) 2006-07 D) 1994-95
80. The chairman of the 15th Finance Commission of India is
A) A.M. Khusro B) K. C. Pant C) N.K. Singh D) Arun Jaitley
81. The basic principle of public finance is:
a) Maximum Social Advanatage b) welfare of the Govt. c) welfare of the Individual d) all
of the above
82. The finance commission is appointed every :
A) 3 years B) 5 years C) 6 years D0 7 years
83. Which of the following is not a fiscal instrument?
a) Open market operations b) Public expenditure c) Taxation d) budget
84. Which of the following is a measure of fiscal policy?
a) Public expenditure b) C.R.R. c) S.L.R. d) Bank rate
85. The First Finance Commission was appointed in the year:
A) 1949 B) 1950 C) 1951 D) 1952
86. Modern Canons of taxation are propounded by:
a)Bastable b) Adam Smith
c) Seligmon d) Pigou
87. In India, personal income tax is levied on individuals by:
a) Central Government b) State Government
c) Local bodies d) None of these
88. Sound tax policy is devised mainly on the basis of:
a) Maximum tax revenue b) Elastic tax base
c ) High income elasticity d) High price elasticity
89. The Kelkar Proposals are concerned with:

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 a) Recommendations for re4forms in the power sector
b) Recommendations for tax reforms
c) Guidelines for the privatization of public sector undertakings
d) None of the above
90. In the case of direct tax, impact and incidence are on:
a) Different person b) Same person
c) Sellers d) None of these
91. The direct violation of Tax law is called:
a) Tax evasion b) Tax avoidance
c) Tax Rebate d) None of these
92. The final resting place of the burden of tax is called:
a) Tax avoidance b) Tax evasion
c) Impact d) Incidence
93. Fiscal policy is the policy of:
a) RBI b) NABARD
c) Government d) All the above
94. The principle of judging fiscal measures by the way they work is called:
a) Personal Finance b) Public Finance
c) Functional Finance d) Local Finance
95. When individuals with unequal tax paying ability should be taxed unequally in order
to equal sacrifice is called:
a) Horizontal equity b) Vertical Equity
c) Tax paying ability d) None of these
96. Elastic revenue response to marginal tax rate reductions is called:
a) Marginal tax curve b) Functional curve
c) Laffer curve d) None of these
97. The neo‐Keynesian approach to public finance is called
a) Functional finance b) Aggregate demand
c ) Global finance d) Federal finance
98. “The best system of public finance is that which secures the maximum social advantage
from the operations which it conducts” is the dictum of
A) Adam Smith B) Dalton C) J.B. Say D) Marshall
99. Which is the method of financial adjustment between Centre and States?
a) Tax sharing b) Grant‐in‐aid
c) Public debt d) Federal Finance
100. Merit goods means:
a) Public good b) Free good
c ) Rare good d) White good
101. The modern state is:
a) Laissez –faire state b) Welfare state
c) Aristocratic state d) Police state
102. According to Musgrave the major functions of public finance is:
a) Allocative function b) Distributive function
c) Stabilisation function d) All the above
103. Who is the author of the book “The Theory of Public Finance”?
a) Dalton b) R A Musgrave
c) A.R. Prest d)Harvey Rosen
104. A criterion by which public goods are distinguished from private goods:

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 a) Exclusion principle b) Externality principle
c) Public choice principle d) None of the above
105. Non‐rivalray and non‐excludability are the characteristics of:
a) Normal goods b) Demerit goods
c ) Inferior goods d) Public goods
106. Which one of the following taxes is levied by the State Government only?
a. Entertainment tax b) Corporation tax
c ) Wealth tax d) Income tax
107. Laffer curve suggest that the
a) Relationship between tax revenue and tax rates is U‐shaped
b) Relationship between GDP growth rate and tax rates is U‐shaped
c) Relationship between tax revenue and tax rates is inverted U‐shaped
d) Relationship between savings rate and tax rate is inverted U‐shaped
108. The controlling authority of Government expenditure is:
a) RBI b) Planning Commission
c) Ministry of Finance d) Finance Commission
109. The idea of ‘Democratic Decentralization’ in India was popularized by:
a) A.D. Gorwala Committee, 1951 b) B.R. Mehta Committee, 1957
c) Ashok Mehta Committee, 1978 d) None of these
110. A tax levied upon a firm as a percentage of its value added
a) Merit tax b) VAT
c) Turnover tax d) Sales tax
111. Which one of the following is the most acceptable theory of taxation:
a) Benefit theory b) Cost of service theory c) Ability to pay theory
d) None of these
112. The Kerala Panchayat Raj Act was passed in the legislature in the year:
a) 1995 b) 1994 c ) 2000 d) 1999
113. The concept of decentralized planning received renewed attention in India with the:
73rd and 74th Constitutional Amendment Acts of : a) 1993 b)1992
C) 1995 d)2000
114. The Indian income tax is:
a) Direct and proportional b) Indirect and proportional
c ) Indirect and progressive d) Direct and progressive
115. The main objective of budgeting is:
a) Planning b) Co‐ordination
c ) Control d) All of these
116. Which tax cannot be shifted to others?
a) Excise duty b) Sales tax
c) Entertainment tax d) Wealth tax
117. Pump Priming is related with
A) Monetary policy B) Income policy C) Price policy D) Fiscal policy
118. Wiseman‐Peacock hypotheses supports in a much stronger manner the possibility of
:
a) An upward trend in public expenditure b) A downward trend in public expenditure
c ) A constancy of public expenditure d) A mixed trend in public expenditure
119. The theory of fiscal policy derives from (A) Principle of sound finance
(B) N.I. analysis (C) Welfare economics (D) None of these

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120. Fiscal Federalism refers to
(A) Sharing of political power between centre and states
(B) Organising and implementing economic plans
(C) Division of economic functions and resources among different layers of Govt.
(D) None of these
121. Which one of the following is an optional function of Government? (A) Defense
(B) Old Age Security (C) Law and Order (D) None of these
122. Principle of sound finance refers to (A) Maximum Government spending
(B) Minimum Government spending
(C) Revenue expenditure balanced at the minimum level
(D) Balance between Tax and spending
123. Private goods are characterized by (A) Application of exclusion principle
(B) Rivalry in consumption (C) Payment of prices (D) All the above
124. The most important aim of fiscal policy in a developing country is
(A) economic stability (B) economic development (C) regional balance
(D) None of these
125. Market failure refers to a situation when
(A) Market does not function (B) market solution occurs if government
intervenes
(C) Social efficiency is not achieved (D) perfectly competitive firm experiences P > MC

126. Public goods are non‐rivial if

(A) Some people cannot be prevented from consuming it
(B) Consumption by one person reduces consumption of other individuals
(C) Some people are excluded from consuming it (D) all the above
127. The income of the government through all its sources is called
(A) Public expenditure (B) public revenue (C) Public finance (D) none of these
128. The maximum effect of direct taxes is on (A) Price of food (B) Income
(C) Capital goods (D) consumer goods
129. The Wanchoo Committee (1971) probed into (A) Direct taxes (B) indirect taxes
(C) Agricultural holding tax (D) non‐tax revenue
130. Deficit financing means (A) Public expenditure in excess of public revenue
(B) Public revenue in excess of public expenditure (C) Both (A) and (B)
(D) none of the above
131. Modvat means (A) Modified value added tax (B) moderate value added tax
(C) Modest value added tax (D) modern value added tax
132.
The revenue of the State Government is raised from the following sources except one, w
hich is that? (A) Land revenue (B) agricultural income tax (C) Entertainment tax
(D) expenditure tax
133. The Finance Commission does all the following functions except one, which is that?
(A) Works out allocation of taxes in the divisible pool
(B) Looks into financial relations between the Centre and the States
(C)Allocates grants ‐ in – aid to the States and Union Territories
(D) Assist the Planning Commission in making 5 year plans.
134. The methods of restoring resource balance between different governments in a fede
ral set‐up is based on (A) Tax sharing (B) Grants –in‐Aid (C) Loans
(D) All the above

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135. Finance Commission determines
(A) The finances of Government of India (B) The resources transfer to t he State
(C) The resources transfer to the various departments (D) none of the above
136. Federal Finance deals with (A) State finances
(B)Finances of railways (C)Local bodies
(D) Centre‐State financial relations
137. Primary deficit means: (A) Fiscal deficit‐ Interest
(B)Revenue deficit‐interest payments (C) Fiscal deficit+ revenue deficit
d) Budgetary deficit
138. Non‐Plan Grants are determined by (A) Planning Commission
(B) Finance Commission (C)Central Government (D) State Government
139. Public Debt Management refers to (A) Terms of new bonds
(B) Proportion of different components of public debt (C) Maturity (D) All the above
140. Public Expenditure increases (A) Interest rate (B) Employment (C) Exports
(D) Imports
141. Central Assistance for State and UT plan is a part of (A) Plan Expenditure
(B) Revenue Expenditure (C) Non‐Plan Expenditure (D) None of the above
142. Defict financing includes a) Borrowing from the Central Bank
b) Issues of new currency by the Government
C ) Withdrawal of past accumulated cash balance by the government
d) All the above
143. The ……. had recommended certain reforms on the devolution of Grant – in –
Aid (Plan fund) to LsGs from 2006‐07 to 2010‐11 (A) 3rd State Finance Commission
(B) 2rd State Finance Commission (C) 1rd State Finance Commission
(D) None of the above
144. There is a view that reduced rates on income tax would lead to a significant rise in in
come tax revenue. This view has been attributed to (A) Herbert Simon
(B) Arthur Laffer (C) Robert Lucas (D) J.B. Say
145. Functional Finance functions through (A) Buying and selling (B) giving and taking
(C) Lending and borrowing (D) All the above
146. The ideal system of public Finance is one where the net benefit is (A) Maximum
(B) Minimum (C) Zero (D) Infinity
147. The burden of long term public debt is on:
(a) Present generation (b) past generation (c) future generation (d) none of these
148. Public debt leads to extravagance, encouraged resort to war and induced bad
economic conditions. This statement is of :
(a) Dalton (b) Adam Smith (C) J.K. Mehta (d) Findley Shirras
149. The main objective of taking private loan is :
(a) To achieve public objectives (b) to achieve personal objectives (c) to achieve long
term objectives (d) none of these
150. Shortcoming of public debt is :
(a) Political slavery (b) danger of insolvency (c) danger to countrys freedom (d) all of the
above
151. Dalton has divided debt redemption fund into:
(a) Two parts (b) three parts (c) Four parts (d) Five parts
152.refers to refusal to repay the debt
(a) Repudiation (b) Capital levy (c) Sinking fund (d) none of the above
153. Marginal cost of providing the public goods to additional consumers is :

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 (a) 0 (b) 1 (c) 2 (d) 3
154. Mixed goods are those goods having benefits which are:
(a) rival (b) Non – rival (c) both a &b (d) none of these
155. Critical Limit Hypothesis was associated with the name of
(a) Dalton (b) Colin Clarke (c) J.M. Keynes (d) Musgrave
156. Escheat is an example of
(a) Direct tax (b) Indirect tax (c) Both a & b (d) none of these
157. Taxes which are based on specific qualities or attributes of goods are called
(a) Specific tax (b) Advalorem tax (c) customs duty (d) Excise duty
158. The item or economic activity on which tax is imposed is known as
(a) Tax buoyancy (b) tax rate (c) Excess burden (d) tax base
159. Gift tax was introduced in the year
(a) 1958 (b) 1959 (c) 1960 (d) 1961
160. -------------------- is a broad based and a single comprehensive tax levied on goods
and services consumed in an economy
(a) VAT (b) CENVAT (c) GST (d) None of these
161. In India GST was introduced in the year
(a) 2016 (b) 2017 (c) 2018 (d) 2019
162.is the first country to implement GST
(a) USA (b) U K (c) Canada (d) France
163. In which year GST was first
introduced (a) 1952 (b) 1953 (c) 1954 (d)
1955
164.is the debt which is paid any legal enforcement.
(a) Voluntary debt (b) compulsory Debt (c) internal debt (d) external debt
165. When the government raises revenue by borrowing from within the country is
known as
(a) Voluntary debt (b) compulsory Debt (c) internal debt (d) external debt
166. free rider problem is one of the characteristics of
(a) Private good (b) Public good (c) merit good (d) mixed good
167. Those goods whose consumption and use are to be encouraged are called
(a) Private good (b) Public good (c) merit good (d) mixed good
168. The concept of Merit good was introduced by
(a) Dalton (b) Keynes (c) R A Musgrave (d) none of these
169. The concept of merit good was introduced in the year
(a) 1959 (b) 1960 (c) 1961 (d) 1962
170. Education is an example of
(a) Private good (b) Public good (c) merit good (d) mixed good
171. The movement from older level of expenditure and taxation to a new and higher
level is called
(a) Concentration effect (b) inspection effect (c) Displacement effect (d) none of these
172. According to Colin Clark maximum limit of the tolerance level is-------of GNP
(a) 24% (b) 25 % (c) 26% (d) 27%
173. A proportional tax is one in which the rate of tax remains---------irrespective of the
level of income.
(a) Zero (b) One (c) Two (d) Constant
174. The modern theory of tax incidence was developed by
(a) Dalton (b) Keynes (c) R A Musgrave (d) none of these

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175. The diffusion theory was associated with the name of

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 (a) Dalton (b) Keynes (c) R A Musgrave (d) Mansfield
176. The Concentration theory of tax shifting and incidence was developed by
(a) Mercantilist (b) Physiocrats (c) Austraian School (d) Keynesians
177. When Ed=∞or Es=0, the whole incidence is on
(a) Buyers (b) Sellers (c) Govt. (d) none of these
178. When Es=∞or Ed=0, the whole incidence is on
(a) Buyers (b) Sellers (c) Govt. (d) none of these
179. When Ed=Es, the burden is divided between
(a) Buyers (b) Sellers (c) both a & b (d) Govt.

180. When Es> Ed, more incidence is on

(a) Buyers (b) Sellers (c) Govt. (d) none of these
181. When Ed>Es, more incidence is on
(a) Buyers (b) Sellers (c) Govt. (d) none of these
182. Securities Transactions Tax(STT) was introduced in the year
(a) 2004-05 (b) 2005-06 (c) 2006-07 (d) 2007-08
183. The first state to introduce VAT was
(a) Bihar (b) Orissa (c) Haryana (d) Kerala
184. The VAT was first introduced in the year
(a) 2003 (b) 2004 (c) 2005 (d) 2006
185.is the process of replacing maturing securities with new securities.
(a) Repudiation (b) Refunding (c) Conversion (d) Capital levy
186.is a special type of “once for all” tax on capital imposed to repay war debts.
(a) Repudiation (b) Refunding (c) Conversion (d) Capital levy
187. Capital Levy method has been advocated by
(a) Keyenes (b) Musgrave (c) Ricardo (d) none of these
188. The Current financial transactions of the government which are of recurring in
nature is known as
(a) Revenue budget (b) Capital budget (c) Surplus Budget (d) Deficit budget
189. --------------- is a statement of estimated capital receipts and payments of the
government over fiscal year.
(a) Revenue budget (b) Capital budget (c) Surplus Budget (d) Deficit budget
190. Keynes has suggested compensatory fiscal policy to counter
(a) Recession (b) Boom (c) inflation (d) none of these
191. Unemployment insurance is an example of
(a) Built in flexibility (b) Formula Flexibility (c) Discretionary Action (d) none of these
192. Integration of discretion and automation into a hybrid form of fiscal policy called
(a) Built in flexibility (b) Formula Flexibility (c) Discretionary Action (d) none of these
193. The existence of economic inequalities among the states is known as
(a) Vertical imbalance (b) Horizontal Imbalance (c) parallel imbalance (d) none of these
194. Existence of Centre State economic inequalities is known as
(a) Vertical imbalance (b) Horizontal Imbalance (c) parallel imbalance (d) none of these
195. When expenditure exceeds total tax revenue, it is called:
a) Surplus budget b) Balanced budget
c) Deficit budget d) None of these

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196. A tax levied at 5 percent on the first Rs. 10,000 of income, 10 percent on the next Rs
20,000 and 12 percent on the next Rs 30,000 would be:
a) Progressive b) Degressive
c) Regressive d) Proportional

197. Which of the following taxes is the most likely to be regressive?

a) Sales tax on mobile phone b) Excise duties on Kerosene
c) Import duties on electronic goods d) Entrainment tax

198. The Benefit Principle of taxation states that tax should be paid in proportion to: [C]
A) Income B) Expenditure C) Benefit D) Utility

199. The most accepted theory of taxation in modern times:[D]

A) Benefit theory B) Cost of service C) Financial Theory D)Ability theory

200. Which one of the following is a tax base

(a) Income (b) utility (c) Intelligence (d) No of these

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 ECONOMICS MULTIPLE

CHOICE QUESTIONS

Answer Key

1. (d) All of these

2. (d) All of these
3. © Secrecy
4. (b) Dalton
5. (a) Compulsory
6. (c) Raising public revenue
7. (d) canon of equity
8. (c) Regressive
9. (c) on whom it is levied
10. (a) Equitable
11. (c) progressive
12. (a) Constant
13. (a) Kaldor
14. (d) Companies
15. (d) Indirect tax
16. (c) Corporation Tax
17. (b) Octroi
18. (a) A tax on special benefits
19. (b) Public goods
20. (b) Merit good
21. (b) Non – excludable
22. (a) Dalton
23. (b) indirect money burden
24. (b) to shift the tax burden on others
25. (a) Adam Smith
26. D) Classical
27. C) Zero
28. B) Ultimate
29. C) Decreases
30. D) Value
31. B) Legitimate
32. D) France
33. C) National boundaries
34. D) Keynes
35. (a) Keynes
36. B) Fiscal Policy
37. B) Deficit
38. C) Classical school
39. C) Utility
40. C) Horizontal
41. D) Tourism
42. B) Interest payments
43. A) Unproductive

13
44. B) Public expenditure
45. B) Interest payments
46. B) German
47. D) Wagner
48. A) Peacock and Wiseman
49. C) 1st April
50. C) Revenue expenditure
51. D) Primary deficit
52. C) 2003
53. D) USA
54. D) Peter Phyrr
55. C) 2006-07
56. C) Statutory grants
57. D)Grants in aid
58. President
59. B) Dalton
60. A) Finance Commission
61. C) Keynes
62. B) Keynes and Lerner
63. A) Sinking fund
64. B) K.C. Neogi
65. A) Repayment of debt
66. B) Budget
67. C) Horizontal equity
68. B) 1986
69. B) K.N. Raj
70. C) Future generation
71. B) 1929-33
72. D) Fiscal policy
73. C) Inflation
74. C) Redeemable debts
75. A) Unfunded debts
76. B) Floating debts
77. B) Floating debts
78. C) Indirect tax
79. D) 1994-95
80. C) N.K. Singh
81. a) Maximum Social Advanatage
82. B) 5 years
83. a) Open market operations
84. a) Public expenditure
85. C) 1951
86. b) Adam Smith
87. a) Central Government
88. a) Maximum tax revenue
89. b) Recommendations for tax reforms
90. b) Same person
91. a) Tax evasion

14
92. d) Incidence
93. c) Government
94. c) Functional Finance
95. b) Vertical Equity
96. c) Laffer curve
97. a) Functional finance
98. a) Adam Smith
99. a) Tax sharing
100. b) Free good
101. b) Welfare state
102. d) All the above
103. b) R A Musgrave
104. a) Exclusion principle
105. d) Public goods
106. a. Entertainment tax
107. a) Relationship between tax revenue and tax rates is U‐shaped
108. c) Ministry of Finance
109. c) Ashok Mehta Committee, 1978
110. b) VAT
111. c) Ability to pay theory
112. b) 1994
113. b)1992
114. d) Direct and progressive
115. d) All of these
116. d) Wealth tax
117. D) Fiscal policy
118. a) An upward trend in public expenditure
119. (A) Principle of sound finance
120. (C) Division of economic functions and resources among different layers of Govt.
121. (B) Old Age Security
122. (C) Revenue expenditure balanced at the minimum level
123. (D) All the above
124. (B) economic development
125. (C) Social efficiency is not achieved
126. (A) Some people cannot be prevented from consuming it
127. (B) public revenue
128. (B) Income
129. (A) Direct taxes
130. (A) Public expenditure in excess of public revenue
131. (A) Modified value added tax
132. (D) expenditure tax
133. (D) Assist the Planning Commission in making 5 year plans
134. (D) All the above
135. (B) The resources transfer to the State
136. (D) Centre‐State financial relations
137. (A) Fiscal deficit‐ Interest
138. (C)Central Government
139. (D) All the above

15
140. (B) Employment
141. (C) Non‐Plan Expenditure
142. d) All the above
143. (A) 3rd State Finance Commission
144. B) Arthur Laffer
145. (D) All the above
146. (A) Maximum
147. (c) future generation
148. (d) Findley Shirras
149. (b) to achieve personal objectives
150. (d) all of the above
151. (d) Five parts
152. A) Repudiation
153. A) 0
154. (c) both a &b
155. (b) Colin Clarke
156. (d) none of these
157. (d) none of these
158. (a) Specific tax
159. (d) tax base
160. (c) GST
161. (b) 2017
162. (d) France
163. (c) 1954
164. (b) compulsory
165. (a) Voluntary debt
166. (c) internal debt
167. (b) Public good
168. (c) Merit good
169. (c) R A Musgrave
170. (a) 1959
171. (c) Merit good
172. (c) Displacement effect
173. (b) 25 %
174. (d) Constant
175. (d) Mansfield
176. (b) Physiocrats
177. (b) Sellers
178. (a) Buyers
179. (c) both a & b
180. (a) Buyers
181. (b) Sellers
182. (a) 2004-05
183. (c) Haryana
184. (a) 2003
185. (b) Refunding
186. (d) Capital levy
187. (c) Ricardo

16
188. (a) Revenue budget
189. (b) Capital budget
190. (A) Recession
191. (a) Built in flexibility
192. (b) Formula Flexibility
193. (b) Horizontal Imbalance
194. (a) Vertical imbalance
195. (a) Surplus budget
196. (a) Progressive
197. b) Excise duties on Kerosene
198. C) Benefit
199. D)Ability theory
200. (a) Income

17
 Money & Financial Markets

1……………..is called banker’s bank

• RBI b. SBI c. Federal Bank d.ICICI bank

2.Which of the following is not a commercial bank

• IOB b. SBI c. RBI d Canara Bank

3…………………..is known as lender of last resort

• Government b. NBFIs c. Commercial Banks d. Central bank

4.Time deposit otherwise called…

a. saving deposit b. deposit multiplier c. current deposit d. fixed deposit

5 Deposit does not get interest

a. saving bank b. current account c. fixed deposit d. none of these

6 is not a primary function of bank

a. accepting deposit b. giving loans c. creating credit d. general utility function

7 is a fixed interest yielding security

a. shares b bonds c. mutual funds d. treasury bills

8. Market for short term funds is called…

• Money market b. capital market c. derived market d. share market

9.Market for long term funds is called..

a. call money market b. money market c. capital market d. buyers market

18
10……. Is the oldest stock exchange in India

• BSE b. NSE c. OTCEI d.Cochin stock Exchange

11. In which year RBI was established?

a. 1947 b.1950 c. 1935 d.1949

12. Full form of SEBI

a. Securities Entering Business in India b. Stock Exchange Board of India c. Spices Exchange
Board of India d. None of of these

13. SEBI was established in the year ….

a. 1988 b. 1990 c. 1995 d.2000

14. capital market is controlled by…..

a. RBI b.AMC c. stock exchange d. SEBI

15. Money market is controlled by

a. RBI b. SBI c.stock exchange d. SEBI

16. Government securities are otherwise called

a. Gilt Edged Securities b debentures c. Commercial paper d. Bill of Exchange

17. Which of the following is not a feature of Indian Money market?

a.presence unorganised sectors b. seasonal stringency of money c. d.

18 NPA means….

• Non -Permanent Asset b. National Preference Asset c. Non- Performing asset d. National
Performance Asset

19. …. Type of asset have low risk

a. Standard b. Doubtful c. sub-standard d. Any of these

20. A market in which securities up to a year traded are called…

a. bond market b. share market c. equities market d. none of these

21……. Is the most liquid asset

• Property b. share c. commercial bill d. money

22. Profitability of bank is associated with..

a. low risk b. high risk c. medium risk d.no relation between risk and profitability

19
23.Commercial bill market is a part of

a. organised money market . b. unorganised money market. C. capital market d. none of these

24. Government securities with more than one year is called

• Bond b. treasury bills c. promissory notes d. none of these

25. Which of the following is not a money market instrument ?

a. call money b. treasury bill c. commercial bills d. debentures

26.The pricing method of new securities on the basis of demand is known as …

a. De-mat b. call money c. underwriting d. book -building

27.An offer of securities to the public for the first time by an unlisted issue is called..

a. FPO b. BPO c. IPO d. None of these

28.Which of the following is not a non-banking financial intermediary

a. post office savings bank b. mutual funds c. commercial banks d.LIC

29.SEBI became a statutory body in ..

a. 1992 b. 1998 c. 1991 d. none of the above

30 South Indian Bank is a…

• Commercial bank b. private sector bank c. scheduled bank d. non-scheduled bank

31.Bank rate refers to …

a. the rate at which central bank rediscounts firs class bills b. the SLR c. qualitative instrument
d. rate of interest charged by the private sector bank.

32.The central monetary authority of India is …

a. Finance ministry b. NITI ayog c. Reserve Bank of India d. SBI

33.Promissory notes are instruments of ..

a. money market b. capital market c. LIC d. GIC

34. Banking belongs to ..

a. primary sector b. secondary sector c. tertiary sector d. all of these

35.Which of the following is a qualitative credit control policy

a. bank rate b. open market operations c. reserve ratio d. credit rationing

36.Credit is created by..

20
 a. SBI b. insurance companies c. government d. commercial bank

37.Banks giving loans to industries and development purpose is called …

a. development finance b. regional finance c. loan market d. marketization

38……. Is an ownership of security

• Bond b. debenture c. equities d any of these

39.The shortest duration financial instrument is …

a. call money b. commercial bill c. T-bill debenture

40.Insurence companies are regulated in India by…

a. AMFI b. RBI c. Stock exchange d. IRDA

41. Which of the following is investment in stock market throughpooled fund of small savers…

a. Pension funds b. EPF c. Mutual fund d. insurance

42. The ratio of money supply to high powered money is called..

a. SLR b.CRR .money multiplier d. base rate

43. M1 plus net time deposits of banks…

a. MI2 b.M2 c.M3 d.M4

44. New Issue market is otherwise called….

a. primary market b. secondary market c. capital market d. call market

45.Secondary market is otherwise called…

a. new issue market b. insurance market c. additional market d. stock exchange

46.......is a credit ship security

• Bonds b. preference shares c. equity shares

47…. Are the ordinary shares of a limited company

• Preference shares b. equity shares c. blue chip shares d. right shares

48......is a guarantee that the shares of a company will be marketed and proposed project will be
financed

• Licensing b.agency service c. underwriting d.none of these

49.Public issue consist of IPO and …….

a.FPO b. IMO c. MPO d. FMO

21
50. Subsequent public offer of securities of a listed company is called …

a.IPO b. FPO c. listing e. none of these

51 In a ….economy, all transactions are carried out different types of payment methods without the
physical use of money.

• Agrarian b. industrialised c. cashless d. cash

52. which of the following is not a digital payment?

a. USSD b. AEPS c. UPI d.CSR

53.Full form of USSD is…

a. Unaccounted System Stand Data b. Unstructured supplementary service data unaccounted

structured System Data . none of these

54. AEPS means…

a. Aadhar Enabled payment Sysem b. AadharEntry Payment System c. Aadhar Enter Pay system.
None of these

55. UPI means…..

a. Unified Payments Interface b. unity payment system c. Unique payment system d.Unique Pass
India

56. BHIM app is a….

a. prepayment system b. digital payment system c. money back system d. insurance app

56. Paytm is an example of ….

a. digital payment b.current payment c. mobile banking d. united inia

57.Gift cards is an example of … payment

a. closed system b.semi-closed system c. semi-open d. open system

58. The deposit multiplier is inverse of …

a. reserve requirements ratio b. credit ratio c. investment multiplier d. any of the above

59. Full form of RTGS is …

a. Real term gross system b. Real time gross settlement c. Real time gross savings d none of these

60.NEFTws launched on….

a. 2000 b. 2005 c. 2008 d. 2016

61. The ease with which banks assets could be converted in to cash is called…

22
a. profitability b. liquidity c. solvency d.adequacy

62. SENSEX is an index of

a. Bombay Stock Exchange b.National Stock Exchange c. OTCEI d. culcutta stock exchange

63.NIFTY is an index of……

a. Bombay Stock Exchange b.National Stock Exchange c. OTCEI d. culcutta stock exchange

64…..is a market for sale and purchase of short term government securities

a.commercial bill market b. treasury bill market c. CDS d. CPs

65.Bill market in India is….

a. developed one b.under developed one. C. organised one d. none of these

66.“Money is what money does” – who said?

a. Crowther b. Robertson c.Walker d. Marshall

67.Direct exchange of goods against goods is called…..

a. Money b. Barter c.digital system d. None of these

68.What possess general acceptability?

a. Bank draft b. Money c. Bill of exchange d.None of these

69.Which type of deposits gives highest rate of interest?

a. Current deposit b.Fixeddeposit c. Recurring deposit d. saving deposit

70.Which of the following is not the function of the commercial bank?

a. Issue of paper notes b. Acceptance of deposits c. Advancing loans d.none of these

71.Which of the following is not near money?

a.Paper notes b. Treasury bill c. Bond d. Bill of exchange

72.Which bank is called lender of last resort?

a.Commercial bank b. Scheduled banks c. private banks d.central bank

73.Which bank enjoys monopoly power of Note issue?

a.Commercial bank b. RRBs c. NABARD d. central bank

74.For which function, money is accepted as unit of

account?

a. Medium of exchange b. Measure of value c. Standard of deferred payment d. Store of value

23
75. ‘Banks’ in monetary aggregates

a. include co-operative banks. b include only commercial banks. C.do not include the RRBs d.
include NABARD

76.Currency in Circulation is a part of

a. M0. b M1. C.M2 d. M3.

77. The difference between M2 and M4 is…..

a.M2 plus FD b. m2 plus Investment c. M2 plus total post office saving deposits d. any of the
these

78.Call money …

• is borrowed by Non-banks from banks. b.is unavailable in unorganized money market. c. is

d.primarily lent by commercial banks. d. is taken by private sector banks

79.Gilt-edged market

a.deals with industrial securities. B. deals with government securities d.is a market for foreign
exchange d. any of these

80. SLR reserves of scheduled banks

a. are kept with the RBI. b can be partly held in current accounts of other banks. c. are maintained
on a weekly basis d. none of these

81. Selective Credit Control methods means…

a. quantitative methods b. qualitative methods c. include SLR d. include bank rate

82.The number of times a unit of money exchanges hands during a unit period of time is known
as…

a. velocity of circulation of money b. speed of circulation of money c. momentum of circulation

of money d. count of circulation of money

83.Currency notes and coins are called as:

a. near money b. Legal tenders c. Fiat money d. any of these

84.In the terminology of economics and money demand, the terms M1 is also known as …..
a. money base b. digital money c. Broad money d. Narrow money

85.In the terminology of economics and money demand, the terms M3 is also known as …
a. money base b. digital money c. Broad money d. Narrow money

86.What is the Cash Reserve Ratio (CRR)?

24
a.the fraction of the deposits that commercial banks lend to the customers b.the fraction of the
deposits that RBI must keep with commercial banks c. the fraction of the deposits that commercial
banks must keep with RBI d. none of the above

87.Which property the paper money does not possess:

• acceptability b. divisibility c. durability d.portability

88. which will promote savings…

a. increase in credit facilities b. increase in taxation c. increase in disposable income d. none of

thee

89. Treasury Bill is a document used for…

a. short term loan for consumers b. short term loan to government c. long term loan to consumers
d. long term loan to government

90. Deposits in bank accounts withdrawn on demand are called..

a.fixed deposits b. recurring deposits c. demand deposits d.none of these

91.Major portion of the deposits is used by banks for….

a. setting up new branches b. paying taxes c.paying interest on loans d. extending loans

92.Marketable securities are primarily..

a.short-term debt instruments b.short-term equity securities c.long-term debt instruments d.long-
term equity securities

93. One of the items is not related with e-banking

a.Demand draft b. ATM B. credit card d.ESA

94.What is OTP in credit card transaction?

a. Odd Transaction Password b. Owner is Trading Pass codec.One Time Passwordd.none of these

95. Stocks or shares that are sold to investors without transacting through financial institutions are
classified as…

a.direct transferb.indirect transferc.global transferd.single transfer

96. Institutions deal in financial functions and protects corporations and individuals against
accidents, theft and death are considered as….

a.penalty companiesb.insurance companies c. mutual funds d.venture funds

97.Minimum period of a Certificate of Deposit is :

a. 15 days b. 30 days c. 10 days d . 7 days

25
 98.A customer has been defined in :

a. Banking Regulation Act b.Negotiable Instruments Act c.Anti-Money Laundering Act d. KYC
guidelines

99. The BSE Sensex consists of a basket of ……

stocks. a.50b. 100 c. 30 d. 66

100. The minimum maturity period for Commercial Paper (CP) is….. days.

a. 14b. 30 c. 45 d. 7

101.A primary market is one in which ..

a. newly printed money is transferred to the banks b. money market dealers make their most
important trades c. the Bank that conducts monetary policy for a country d. financial assets are
traded for the first time.

102.The money market is for the trading of …..instruments while the capital market is where
….instruments are traded.

a. bonds, Treasury-bills b. long-term, short-term c. cash, tangible d.short-term, long-term

103.The UPI is a payment service which has been developed by…..

a.BIS b b.NPCIc.SWIFTd.none of these

104.What does the letter ‘P” stand for in the term AEPS ?

a. Payment b. Processing c. Procurementd. Punching

105The IFSC is an 11-digit alpha-numeric code that uniquely identifies a bank branch. The term
IFSC means…

a.Indian Forwarding System Codeb.Indian Fiduciary System Codec.Indian Financial System Code

d.None of these.

106. Which of the following is a not Non Banking Financial institution

a) UTI b) LIC c) SEBI d)GIC

107. Which of the following is not a money market instrument?

a) Commercial Bills b) Certificate of Deposits

c) Gilt Edged Securities d) Treasury Bills.

108. Which of the following is a not Non Banking Statutory Financial Organisation

26
a) IRDA b) IFCI c) NABARD d) UTI

109. Money Market Mutual Fund Scheme was introduced in:

a) April 1981 b) April 1991 c) April 2001 d) April 2000

110. Certificate of Deposit was introduced in :

a) March 1989 b) March 1999 c) April 1999 d) April 2000

111. The SEBI cannot issue guidelines in respect of :

a) Information disclosure and investor protection

b) Pricing of issues.

c) Monetary policy of the country.

d) Development of financial institutions

112. Which of the following is not an Indian Capital Market?

a) Primary market b) Security market c) Secondary market d) Commercial bill market

113. Which of the following is not included in M1 measure of money supply?

a) Currency b) Coins

c) Fixed Deposits d) Demand Deposit

114. Broad money is also known as

a) M1 b)M2

c)M0 d) M3

115. Green shoe option was introduced in the Indian capital market in the year :

a) 1991 b) 1999 c) 2003 d) 2005

116. Which was the first Indian commercial bank to set up a separate merchant banking division?

a) Canara Bank b) SBI c) RBI d) Indian Bank

117. The first bank to set up a separate merchant banking division in India among the following.

a) Punjab National Bank b) Standard Chartered Bank

c) Nation Grindlays Bank d) National City Bank

118. Which of the following regulates Indian Capital Market?

a) RBI b) FII c) SBI d) SEBI.

27
119. Which of the following is not an NBFI?

a) LIC b) HDFC c) SBI d) Post office.

120. Which f the following is not a money market instrument?

a) Call money b) Bill of Exchange c) Treasury bills Bonds d) Bond.

121. Which of the following is the stock market index of Japan?

a) Dow Jones b) NASDAQ c) Nikkei d) KOSPI

122. How many shares are included in the Nifty?

a) 20 b) 30 c) 40 d) 50

124. Who is the chairman of SEBI?

a) Ajay Tyagi b) M S Ahluwalia c) U K Sinha d) Subba Rao

125. The institution which pools savings of small investors and makes investments in the stock
market.

a) Provident Fund b) Venture Capital Fund c) Mutual Fund d) Pension Fund.

126. The legal agreement to purchase the unsubscribed portion of a new issues:

a) Demating b) Underwriting c) Book Buildingd) Kerb Trading.

21. The holder of which of the following is the actual owner of a company?

a) Debentures b) Bond c) Equity shares d) None of these.

127. A person who buys a share in anticipation of a future rise in price

a) Bear b) Bull c) Stag d) Donkey.

128. The market for long term funds

a) Money market b) Foreign exchange Market c) Capital Market d) Bullion market.

129. Which of the following is issued free of cost

a) Ordinary Share b) Rights Share c) Bonus Share d) Preference Share.

130. Which of the following institution is associated with the savings of the salaried people?

a) Provident fund b) mutual fund c) Venture capital fund d) Exchange traded fund.

131. FII were permitted to invest in the Indian stock market from

28
a) 1991 b) 1992 c) 1993 d) 1990

132. The biggest stock exchange in India

a) BSE b) Calcutta Stock Exchange c) NSE d) Cochin Stock Exchange

133. Banking belongs to

a) Primary sector b) Secondary sector c) Tertiary sector d) None of these

134. The present RBI governor is

a) Shri HYPERLINK "https://m.rbi.org.in/Scripts/governors.aspx" HYPERLINK

"https://m.rbi.org.in/Scripts/governors.aspx"Shaktikanta HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx" Das b) Dr. HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx"Urjit HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx" R. Patel c) Dr. HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx"Raghuram HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx" HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx"Rajan d) Dr. D. HYPERLINK
"https://m.rbi.org.in/Scripts/governors.aspx"Subbarao

135. Which type of banking is popular in India.

a) Mixed Banking b) Chain Banking c) Unit banking d) Branch Banking

136. Which is an example of qualitative credit control measure?

a) Bank Rae b) CRR c) Open market operations d) Moral suation.

137. Credit is created by:

a) Government b) Customer c) Central Bank d) Commercial Bank

138. The credit creation capacity of a commercial bank is limited by

a) Investments b) CRR c) Liabilities d) Deposits.

139. The banks are required to maintain a certain ratio between their cash in hand total assets. This is called

a) SLR b) PLR c) Bank Rate d) CRR.

140. Banking business involved in providing loan facilities for industrial and other development
purpose is denoted as

a) Development Banking b) Regional Banking c) Branch Banking d) Unit Banking

141. Normally no interest is paid on

a) Fixed Deposits b) Current deposits c) Saving Deposits d) Recurring Deposits.

142. Which of the following committee examined and suggested financial sector reforms

29
a) Abid Hussian Committee b) Bhagwati Committee

c) Chelliah Committee d) Narasimham Committee

143. The oldest central bank of the world

a) Bank of England b) Bank of Sweedon

c) Bank of Japan d) Federal Reserve System of USA

144. During periods of inflation the policy followed is

a)Dear money policy b) Cheap money policy c) Clear money policy d) Fiscal policy.

145. Which is an example of quantitative credit control policy

a) Bank rate b) CRR c) Open market operations d) ALL the above.

146. This is the function of a commercial bank.

a) Printing notes b) Lender of the last resort

c) Credit creation d) Agent of the Government

147. Loans and investment for a commercial bank is

a) Liability b) Assets c) NPAs d) None of the above.

148. Narasimham Committee was appointed to look in to

a) Fiscal reforms b) Financial sector reforms

c) Trade policy reforms d) Industrial sector reforms.

148. The reserve ratio is usually determined by

a) The commercial banks b) The free play of market forces

c) The monetary authority d) All the three together.

149. Which system of note reserves is followed in India?

a) Fixed Fiduciary System b) Proportionate reserve system

c) Minimum Reserve system d) None of the above.

150. The monetary authority of a nation is

a) Central government b) State Government c) Central Bank d) None of these

151. Credit creation is an important function of

a) Commercial Banks b) RBI c) UTI d) None of these.

152. RBI was established in

30
a) July 12 1982 b) July 12 1985 c) July 12 1980 d) July 12 1991

153. What are the liabilities of a bank?

a) Advances b) Time Deposits c) Accumulated Reserves d) Cash with the Rbi.

154. Banks liquidity means

a) Capacity to produce cash on demand b) to create credit

c) Arrangement of cash d) All the above.

155. Commercial banks mainly invest in

a) Government securities b) LIC policies of the staff c) Treasury Bills d) Equity shares

156. In Banking history 1969 is known for

a) Agriculture finance b) Nationalisation of banks c) Credit creation d) None of these.

157. This is not a commercial bank.

a) RBI b) SBI c) PNB d) Canara Bank.

158. The Banking Regulation Act was passed in

a) 1950 b) 1949 c) 1969 d) 1991.

159. Lender of last resort is

a) RBI b) State Bank of India c) ADB d) IDBI.

160. Overdraft means

a) Crossing a draft b) Banking reform c) Signing a draft d) Allowing more

withdrawal than deposit.

161. In the terminology of economics and money demand, the terms M3 and M4 are also known
as :

a) Short money
b) Long money
c) Broad money
d) Narrow money

162. In the terminology of economics and money demand, the terms M3 and M4 are also known
as :

a) Short money
b) Long money
c) Broad money
d) Narrow money

31
163. What is the currency deposit ratio (cdr)?

a) ratio of money held by the public in currency to that of money held in bank deposits
b) ratio of money held by the public in bank deposits to that of money held by the public in
currency
c) ratio of money held in demand drafts to that of money held in treasury bonds
d) none of the above

164. What is the Cash Reserve Ratio (CRR)?

a) the fraction of the deposits that commercial banks lend to the customers
b) the fraction of the deposits that RBI must keep with commercial banks
c) the fraction of the deposits that commercial banks must keep with RBI
d) none of the above

165. What is 'Bank rate'?

a) The rate at which commercial banks borrow money from RBI

b) The rate at which commercial banks lend money to customers
c) The rate at which commercial banks lend money to RBI
d) none of the above

166. In monetary terminology, what is called the 'monetary base' or 'high powered money'?

a) the total assets of RBI

b) the total liability of RBI
c) the total debt of the government
d) the total foreign exchange of RBI

167. The RBI can increase the money supply in the market by:

a) selling government securities

b) buying government securities
c) borrowing money from commercial banks
d) none of the above

168. The RBI can decrease the money supply in the market by:

a) selling government securities

b) buying government securities
c) borrowing money from commercial banks
d) none of the above

169. By increasing the 'Bank Rate', the RBI can:

a) provide incentives to commercial banks to lend more to public

b) provide incentives to commercial banks to lend less to public

32
c) increase the money supply in the market
d) none of the above

170. Which one of the following does not belong to the major general insurance private sector
companies in India?

a) Bajaj Allianz General Insurance

b) Reliance General Insurance
c) Royal Sundaram Alliance Insurance
d) The Oriental Insurance Company

171. When was the Oriental Life Insurance Company established? a)

1818
b) 1834
c) 1907
d) 1938

172. When was Life Insurance sector nationalised? a)

1834
b) 1907
c) 1938
d) 1956

173. When was the Insurance Regulatory and Development Authority constituted? a)

1938
b) 1971
c) 1993
d) 1999

174. Which of the following is not a public sector bank in India?

a) Andhra Bank
b) Federal Bank
c) IDBI Bank
d) Vijaya Bank

175. Which of the following is not a part of India's Money Market?

a) Banks
b) Bill Markets
c) Call Money Market
d) Indian Gold Council

176. Which one of the following does not belong to regulatory bodies in India?

33
a) FMC
b) IRDA
c) PFRDA
d) SEBI

177. Which one of the following is the special drawing rights given by the International
Monetary Fund to its member countries?

a) Cold money
b) Hot money
c) Paper gold
d) None of these

178. What does the letter 'S' denote in the term IFSC?

a) Subscriber
b) State
c) System
d) Source

179. 'Subprime lending' is a term applied to the loans made to

.

a) Those borrowers who do not have a good credit history

b) Those borrowers who have a good credit history
c) Those borrowers who do not have a good debit history
d) Those borrowers who have a good debit history

180. What is the full form of CBS?

a) Core Banking Solution

b) Core Banking Software
c) Core Banking System
d) Core Banking Service

181. Which among the following is the act of taking on a risk for a fee?

a) Guidewire
b) Initial Public Offering
c) Predictive analytics
d) Underwriting

182. Which among the following is called the rate of interest charged by RBI for lending
money to various commercial banks by rediscounting of the bills in India?

a) Bank Rate
b) Discount Window
c) Monetary Policy

34
d) Overnight Rate

183. Which of the following are to be followed by Commercial Banks for risk management?

a) Basel II norms
b) Basel III norms
c) Basel I norms
d) Solvency II norms

184. What is the full form of CRR?

a) Cash Reserve Rate

b) Cash Reserve Ratio
c) Cash Recession Ratio
d) Core Reserve Rate

185. Which one of the following is known as the recession occurring two times with a small gap in
between?

a) Deep Recession
b) Deflation
c) Double-dip Recession
d) Double Inflation

186. "Basel Committee on Banking Supervision" is also known as

.

a) Bank for International Settlements Committee

b) Banking Regulation Committee
c) Financial Stability Board
d) Global Financial System

187. What is the full form of NAV?

a) Net Actual Value

b) Net Annual Value
c) Net Asset Value
d) Net Average Value

188. Who issues 'Commercial Papers'?

a) A Company to a Bank
b) Banks to Banks
c) Banks to Companies
d) Company to its suppliers

189. What is the full form of SWIFT?

35
a) Safe Window for Interbank Financial Transactions
b) Safe Window In case of Financial Transaction
c) Society for Worldwide Interbank Financial Telecommunication
d) Safe Window Institute For Transactions

190. Which of the following is known as the concept of a standard contract to buy or sell a
specified commodity at a certain date in future and at a market driven price?

a) Forward Contract
b) Futures Contract
c) Market Contract
d) Standard Contract

191. Which one of the following set up core banking infrastructure for rural banks?

a) IBA
b) NABARD
c) RBI
d) SIDBI

192. Which organization provides credit history of the borrowers?

a) CIBIL
b) CII
c) FRBI
d) IRDA

193. Which one of the following organisations has been set up to facilitate connectivity
between the Bank's switches and their ATMs, and inter bank payment gateway for
authentication and routing the payment details of various e-commerce transactions?

a) IBA
b) IDRBT
c) IRDA
d) SIDBI

194. Which is a tool that helps RBI to stabilize money supply and prices of Government
securities?

a) EOQ
b) EPQ
c) JIT
d) OMO

195. Who regulates the Mutual Funds in India?

a) FRBI
b) SEBI

36
c) SIDBI
d) RBI

196. What is 'fiat money'?

a) The currency is backed by Government Guarantee

b) The currency is backed by tangible assets
c) The currency is backed by gold reserves
d) The currency is backed by budgetary support

197. Who sets up 'Base Rate' for Banks?

a) Individual Banks Board

b) Interest Rate Commission of India
c) RBI
d) None of the above

198. Which of the following are the amounts owed to a company that are not going to be paid?

a) Bad debts
b) Non-performing Assets
c) Out of order accounts
d) Overdrawn accounts

199. Whom with Primary Dealers deal in both primary and secondary markets?

a) Corporate Bonds
b) Debentures
c) Equities
d) Government Securities

200. What is Mortgage?

a) A security created on immovable property for a deposit received by a bank

b) A security created on immovable property for a loan given by a bank

c) A facility created on movable property for a deposit received by a bank

d) A security created on movable property for a loan given by a bank

201. Which is the minimum lending rate decided by RBI which shall be adopted by all Public Sector
Banks?

a) Bank rate
b) Base rate
c) Overnight rate

37
d) None of the above

202. High-powered money does not include

• Currency
• Coins
• Reserves
• Demand Deposits .

203. High powered money includes

• Reserves
• Demand Deposit
• Savings Deposit
• Fixed Deposit

204. Money Supply= High Powered Money x

• Investment multiplier
• Money multiplier
• Foreign Trade multiplier
• Employment Multiplier

205. Money multiplier =

a) High powered money x Money supply
b) High powered money/Money supply
c) Money supply/ high powered money
d) Money supply + High powered money

38
 Money & Financial Markets
Answer Key

• A

• C

• D

• D

• B

• D

• B

• A

• C

• A

• C

• D

• A

• D

• D

• A

• C

• A

• A

• D

• A

39
• A

• A

• D

• D

• C

• C

• A

• A

• A

• C

• A

• C

• D

• A

• C

• A

• D

• C

• A&B

• C

• A

• D

• B

• B

• A

40
• B

• C

• A

• B

• A

• A

• A

• A

• B

• B

• B

• A

• A

• B

• B

• C

• B

• B

• B

• A

• C

• D

• D

• D

• B

41
• .

• .

• B

• D

• B

• A

• .

• D

• C

• C

• C

• C

• B

• C

• D

• .

• A

• C

• A

• B

• D

• D

• C

• D

• D

• D

• D

42
• A

• C

• C

• C

• C

• B

• A

• C

• D

• C

• D

• C

• B

• A

• D

• C

• D

• C

• D

• .

• A

• C

• B

• B

• C

• C

• A

43
• .

• C

• C

• A

• D

• D

• D

• B

• A

• A

• B

• D

• A

• A

• D

• C

• B

• B

• C

• C

• A

• .

• B

• A

• A&D

• B

• A

44
• B

• A

• D

• C

• C

• D

• C

• A

• A

• B

• A

• B

• D

• A

• D

• D

• B

• D

• A

• C

• C

• A

• C

• D

• A

• A

• B

45
• C

• A

• C

• A

• C

• B

• B

• A

• B

• D

• B

• A

• C

• A

• C

• A

• B

• D

• A

• B

• C

46