Daily Static MCQs for UPSC & State PSC Exams - Economy (01 June 2023)

Daily Static MCQs Quiz for UPSC, IAS, UPPSC/UPPCS, MPPSC. BPSC, RPSC & All State PSC Exams

Subject : Economy

1. With reference to entertainment tax, consider the following statements:

1. It is an indirect tax and it is levied uniformly in all over India.
2. The state government imposes the entertainment tax and the central government levies the GST.
3. Article 246 of the Indian Constitution lists down all rules and guidelines that are applicable to the entertainment tax in India.

How many of the above statements are correct?

(a) Only one
(b) Only two
(c) All three
(d) None

Answer: (B)

Explanation:

  • Entertainment tax is levied by the government on commercial shows, movie tickets, sporting events, music festivals, amusement parks, exhibitions, theatre shows, and other private festivals. Entertainment tax varies from state to state. Entertainment tax comes under the category of indirect tax. Entertainment tax in the country is different for different states since it is under the purview of the state governments .This is the reason why various states in India have various entertainment tax rates. Hence, statement 1 is incorrect.
  • Entertainment tax has been replaced by the Goods and Services Tax (GST) starting 1 July 2017 (The state government imposes the entertainment tax and the central government levies the GST. The rate of GST on movie tickets is 28 %). Hence, statement 2 is correct.
  • Article 246 of the Indian constitution lists down all rules and guidelines that are applicable to the entertainment tax in India. Hence, statement 2 is correct. Entertainment tax applies to the following categories of entertainment too:
  • Exhibitions
  • Activities related to sports
  • Amusement Parks
  • Arcades
  • Celebrity Stage Shows
  • Theatre Shows
  • Video Games
  • In India, the entertainment tax was first introduced in the year 1948. Entertainment tax was launched when the British Government ruled India, in order to curb public gatherings. However, the levying of the tax continued in the post-independence era too and still exists in all states of the country.

2. Consider the following statements, with reference to Nominal GDP and Real GDP:

1. Nominal GDP is the money value of all goods and services used in calculating GDP at the current price.
2. The value of all goods and services used in calculating GDP at the base year price is called Real GDP.
3. Nominal GDP is considered as a true indicator of a country's economic growth.
4. Real GDP can never be more than the nominal GDP.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 3 and 4 only
(c) 1, 2 and 4 only
(d) 1, 2 and 3 only

Answer: (A)

Explanation:

  • Nominal GDP is the monetary value of the economic output produced during the current year at current year prices. Hence, statement 1 is correct.
  • Real GDP reflects the economic output at constant price. In other words, Real GDP is the money value of all the goods and services used in calculating GDP at the base year price. Hence, statement 2 is correct.
  • Real GDP is considered as a true indicator of a country's economic growth because it exclusively considers the rise in production of goods and services as the reason for increase in GDP. Hence, statement 3 is incorrect.
  • Nominal GDP can be less than real GDP if prices in the current year are less than the prices in the base year. Hence, statement 4 is incorrect.

3. Consider the following statements regarding the fiscal management:

1. Union government will give 50 year interest free loans to states which are to be spent on capital expenditure within 2023-24.
2. Fiscal Deficit of 3.5% of GSDP is allowed for states (in which 0.5% is tied to power sector reforms).
3. Targeted fiscal deficit to be below 4.5% by 2024-25.

Which of the above statements are correct as per budget 2023-24?

(a) 1 and 3 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (B)

Explanation:

  • Finance minister Smt. Nirmala Sitharaman said that the entire 50-year loan to states must be spent on investments within 2023-24. Most of this is at the discretion of the states, but some is contingent on states increasing their actual capital spending. Hence, statement 1 is correct.
  • The finance minister said that states would be allowed a budget deficit of 3.5 percent of GSDP, of which 0.5 percent would be tied to energy sector reforms. Hence, statement 2 is correct.
  • The central government has pledged to bring the budget deficit below 4.5% of GDP by 2025-26, signaling its commitment to fiscal consolidation. Hence, statement 3 is incorrect.

4. Which of the following statement(s) is/are incorrect regarding the e-way bill system?

1. Transporters of the goods can generate the e-way bill.
2. The e-way bill is required for the transportation of all goods except for handicraft goods.
3. Its validity depends upon the distance the goods have to be transported.

Select the correct answer using the code given below:

(a) 2 only
(b) 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (A)

Explanation:

  • E-way Bill: It is a document required to be carried by a person in charge of the conveyance carrying any consignment of goods of value exceeding fifty thousand rupees as mandated by the Government in terms of section 68 of the Goods and Services Tax (GST) Act. The consignor or consignee, as a registered person or a transporter of the goods, can generate the e-way bill. Hence, statement 1 is correct.
  • Movement of handicrafts goods for job-work purpose under specified circumstances also requires the e-way bill even if the value of consignment is less than fifty thousand rupees. Hence, statement 2 is incorrect.
  • The validity of the e-way bill depends upon the distance the goods have to be transported. Hence, statement 3 is also correct.

5. Consider the following statements, with reference to the Certificate of Deposit (CD):

1. It is used by banks and issued to the depositors for a specified period ranging more than one year.
2. They are negotiable and tradable in the money market.
3. Financial institutions are allowed to issue CDs for the maturity periods above one year and upto three years.

Which of the statements given above are correct?

(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3

Answer: (B)

Explanation:

  • Certificate of Deposit (CD) is organized in 1989, it is used by banks and issued to the depositors for a specified period ranging less than one year. Hence, statement 1 is incorrect.
  • They are negotiable and tradable in the money market. Since 1993, the RBI allowed the financial institutions to operate in it – IFCI, IDBI, IRBI and Exim Bank they can issue CDs for the maturity periods above one year and upto three years. Hence, statements 2 and 3 are correct.