Fiscal Policy PYQs — 12 UPSC CSE Previous Year Questions

Question 1

Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy?

Accepted Answer

B. A situation where Government borrowing leads to higher interest rates, which reduces private investment

Question 2

Which among the following steps is most likely to be taken at the time of an economic recession?

Accepted Answer

B. Increase in expenditure on public projects

Question 3

Along with the Budget, the Finance Minister also places other documents before the Parliament which include ‘The Macro Economic Framework Statement’. The aforesaid document is presented because this is mandated by:

Accepted Answer

D. Provisions of the Fiscal Responsibility and Budget Management Act, 2003

Question 4

In India, which of the following can be considered as public investment in agriculture?

Fixing Minimum Support Price for agriculture produce of all crops
Computerization of Primary Agriculture Credit Societies
Social Capital development
Free electricity supply to farmers
Waiver of agriculture loans by the banking system
Setting up of cold storage facilities by the governments

Select the correct answer using the code given below:

Accepted Answer

C. 2, 3 & 6 only

Question 5

The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus

Accepted Answer

C. procurement incidentals and distribution cost

Question 6

Consider the following statements : The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter. Which of the statements given above is/are correct ?

Accepted Answer

C. 1 and 3 only

Question 7

There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit? Reducing revenue expenditure Introducing new welfare schemes Rationalizing subsidies Expanding industries Select the correct answer using the code given below.

Accepted Answer

A. 1 and 3 only

Question 8

A decrease in tax to GDP ratio of a country indicates which of the following? Slowing economic growth rate Less equitable distribution of national income Select the correct answer using the code given below.

Accepted Answer

A. 1 only

Question 9

Which one of the following statements appropriately describes the "fiscal stimulus" ?

Accepted Answer

B. It is an intense affirmative action of the Government to boost economic activity in the country

Question 10

Consider the following actions by the Government:

Cutting the tax rates
Increasing the government spending
Abolishing the subsidies

In the context of economic recession, which of the above actions can be considered a part of the ‘fiscal stimulus’ package?

Accepted Answer

A. 1 & 2 only

Question 11

Consider the following statements:

In India, stamp duties on financial transactions are:

levied and collected by the State Government
appropriated by the Union Government

Which of these statements is/are correct?

Accepted Answer

D. Neither 1 nor 2

Question 12

A redistribution of income in a country can be best brought about through:

Accepted Answer

A. Progressive taxation combined with progressive expenditure