Which among the following is a tool of Fiscal Policy?
- A.Taxes
- B.Cash Reserve Ratio
- C.Credit Ceiling
- D.Bank Rate
Correct answer
Explanation
The correct answer is A, Taxes. Fiscal policy is the government's use of taxation and public spending, so taxes are its main tool. In India, fiscal policy is run by the Union Government through the Ministry of Finance, and the Union Budget is its yearly statement. By raising or cutting taxes and spending, the government tries to steer growth, jobs and prices, and the gap between what it spends and what it earns is the fiscal deficit. Monetary policy is the other lever, and it belongs to the Reserve Bank of India, which works through money supply and credit. Option B is wrong because the Cash Reserve Ratio, the share of deposits banks must keep with the RBI, is a monetary tool. Option C is wrong because a credit ceiling, a limit on how much banks may lend, is a selective credit control used by the RBI. Option D is wrong because the Bank Rate, at which the RBI lends to banks, is also a monetary tool. Exam tip: fiscal means the Finance Ministry's taxes and spending; monetary means the RBI's rates and ratios.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about 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 statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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