Note: Fiscal Policy of Pakistan MCQs. These MCQs publish accordingly to the pattern and syllabus of the Inspector Inland Revenue test in the Federal Board of Revenue Department. If you don’t know about the Syllabus, then first check the syllabus Click Here. In case of any error, mentioned it in the comment box below.

 

1. Fiscal Policy means:

A. It is a Policy Concerned with the Government Revenue and its expenditures
B. It is a necessary Policy of any Country
C. It is a Policy of Economic Growth
D. None of these

Answer

Correct Answer: A. It is a Policy Concerned with the Government Revenue and its expenditures 

 

2. Who said that Fiscal Policy is attached with the determination of times type and procedure as be followed in making revenues and Government expenditures?

A. Samuelson
B. Admin Search
C. Professor Laffer
D. None of these

Answer

Correct Answer: C. Professor Laffer

 

3. According to Fiscal Policy is concerned with all those arrangements which are adopted by government to collect the revenues and make the expenditures of the scene?

A. M.W Lee
B. Lindholm
C. Samuelson
D. None of these

Answer

Correct Answer: C. Samuelson 

 

4. According to M.W lee Fiscal Policy Considers:

A. Imposition of Taxes
B. Government Expenditures
C. Public debt
D. Management of Public debt
E. All of these

Answer

Correct Answer: E. All of these 

 

5. What is the instrument of fiscal policy of any Country?

A. Government of Expenditures
B. Taxes
C. Deficit Financing
D. Government Borrowing and printing of new Currency Notes
E. Transfer of payments
F. All of these

Answer

Correct Answer: F. All of these 

 

6. Which type of vices capitalist world has to face?

A. Inflation
B. Deflation
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

7. What are the major objectives of fiscal policy?

A. Price Stability
B. Influencing the Consumption Pattern
C. To Raise the Level of Employment
D. Redistribution of Income
E. Economic Development
F. Removal of Deficit Balance of Payments (BOP)
G. All of these

Answer

Correct Answer: G. All of these 

 

8. When excess demand is controlled?

A. The Inflation will be Controlled
B. The Inflation will be Increased
C. Taxes are Increased on Public
D. None of these

Answer

Correct Answer: A. The Inflation will be Controlled 

 

9. Imports can be checked by Imposing:

A. Higher Duties on the Luminous Imports
B. Lower Duties on Imports
C. Both a & b
D. None of these

Answer

Correct Answer: A. Higher Duties on the Luminous Imports 

 

10. Who said that there exists a negative relationship between re-employment and inflation?

A. Landholm
B. Simuesom
C. Philip
D. None of these

Answer

Correct Answer: C. Philip 

 

11. What is the justification for redistribution of Income?

A. It will check the higher marginal propensity to import
B. Increase in Productivity
C. Creating a large Market
D. All of the Above

Answer

Correct Answer: D. All of these 

 

12. Due to Inflation:

A. A Country’s income Falls
B. Reduce the Imports of the Country
C. Balance of Payment’s Position is Improved
D. All of these

Answer

Correct Answer: D. All of these 

 

13. A strict fiscal policy will have a negative effect on countries:

A. Employment
B. Production
C. Investment
D. All of these

Answer

Correct Answer: D. All of these 

 

14. Role of fiscal policy in trade cycles to improve the:

A. Progressive System of Taxation
B. Unemployment Allowances and Other Welfare Contributions
C. Agricultural Prices Support Policies
D. All of these

Answer

Correct Answer: D. All of these 

 

15. Fiscal policy can be used for:

A. Economic Stabilization
B. To Remove Boom
C. To Remove Depression
D. All of these

Answer

Correct Answer: D. All of these 

 

16. If an easy fiscal policy is adopted then:

A. Government Expenditures;
B. Taxes are Decreased
C. Subsidies are Provided to Consumers and Producers
D. All of these

Answer

Correct Answer: D. All of these 

 

17. If a tight fiscal policy is adopted then:

A. Government Expenditures
B. Taxes are Decreased
C. Subsidies are Withdrawn
D. All of these

Answer

Correct Answer: D. All of these 

 

18. Mention the automatic fiscal stabilization?

A. Progressive System of taxation
B. Unemployment Allowances
C. Agricultural Price Support Policies
D. All of these

Answer

Correct Answer: D. All of these 

 

19. If the economy having inflation or an Inflationary gap it can be removed by:

A. Increasing Taxes
B. Decreasing Taxes
C. Buying Agricultural Items
D. None of these

Answer

Correct Answer: A. Increasing Taxes 

 

20. Deficit financing means:

A. Bank Borrowing
B. Non-Banking Borrowing
C. Printing of New Currency
D. All of these

Answer

Correct Answer: D. All of these 

 

21. What are the advantages of borrowing for the Government?

A. The Government does not face more inconveniences
B. Having no negative effect on private investment
C. The Repayment of Loan and Interest has to be made in local currency
D. All of these

Answer

Correct Answer: D. All of these 

 

22. What are the demerits of Borrowing?

A. Inflation will Generate
B. Burden on National Economy
C. Decrease in National Income
D. All of these

Answer

Correct Answer: D. All of these 

 

23. Fiscal policy and economic stabilization having major features?

A. The Annual Balanced Budget
B. Balanced Budget for Trade Policy
C. Fully Managed Compensatory fiscal Policy
D. All of these

Answer

Correct Answer: D. All of these 

 

24. By which elements determine the level of disposable income?

A. By Taxes
B. By Changing Tax Rate
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

25. To raise new public loans and repayment of previous public loans is commonly known as:

A. Loan
B. Public Debt
C. Inflation
D. Deflation

Answer

Correct Answer: B. Public Debt 

 

26. The public debt consists of:

A. Banks Loans
B. Non-Basis Loans
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

27. Public debt having major features:

A. Borrowing from State Bank
B. Treasury Loans
C. Printing of New Currency
D. All of these

Answer

Correct Answer: D. All of these 

28. During depression government should do:

A. Funds are Accumulated with the Banks
B. Government Borrowing Funds From Various Sources
C. Basic Loans
D. Non-Basic Loans

Answer

Correct Answer: C. Basic Loans 

 

29. During depression government should do:

A. Government Should Decrease Taxes
B. Government Should increase Expenditures
C. Borrowing from Public Commercial and State Bank
D. All of the Above

Answer

Correct Answer: D. All of the Above 

 

30. During depression which type of expenditures can be made?

A. Pump Printing
B. Compensatory
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

31. Mention the tags and periods obstruct the effectiveness of Fiscal Policy?

A. Recognition Lag
B. Administration Lag
C. Operation Lag
D. All of these

Answer

Correct Answer: D. All of these 

 

32. Who said “when Government decreases taxes the disposable increase of the people would increase?

A. Professor Laffer
B. Lindholm
C. Samuelson
D. None of these

Answer

Correct Answer: C. Samuelson 

 

33. In H-D model mention the types of growth paths?

A. Rate of Growth of Productive Capacity
B. Growth Rate of Labor Force
C. Growth Rate of Aggregate Demand
D. All of the above

Answer

Correct Answer: D. All of the above 

 

34. Mention the major Components of the neo-classical model and fiscal policy?

A. Growth of Productive Efficiency
B. Growth of Aggregate Demand
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

35. The Peacock and Shaw model relates to:

A. Public Debt
B. Inflation
C. Fiscal Policy
D. None of these

Answer

Correct Answer: C. Fiscal Policy 

 

36. Mundell’s model relates to:

A. Inflation and Growth Rate
B. Deflation and Growth Rate
C. Debt and Taxes
D. None of these

Answer

Correct Answer: A. Inflation and Growth Rate 

 

37. The amount which is paid to the government by the people and firms is commonly known as:

A. Debt
B. Loan
C. Taxes
D. None of the above

Answer

Correct Answer: C. Taxes 

 

38. What are the major types of Taxes?

A. Direct and Indirect Taxes
B. Proportional and Progressive Taxes
C. Specific and Valorem Taxes
D. All of these

Answer

Correct Answer: D. All of these 

 

39. The direct tax is such a tax which has to be paid by the person whom has been imposed Mention its kind/kinds of ‘Direct Tax’?

A. Income Tax
B. Wealth Tax
C. Property Tax
D. All of these

Answer

Correct Answer: D. All of these 

 

40. The indirect tax is one which has to be paid by the person whom upon it has not been imposed Mention its types?

A. Custom Duty
B. Sales Tax
C. Excise Duty
D. All of these

Answer

Correct Answer: D. All of these 

 

41. Direct taxes are imposed on:

A. Income from Building
B. Income from Land and Tangible Assets
C. Income from Movable Property
D. All of these

Answer

Correct Answer: D. All of these 

 

42. Direct tax imposed upon the income of:

A. Business
B. Personal Income
C. Income from Progression
D. All of these

Answer

Correct Answer: D. All of these 

 

43. What are the merits of direct taxes?

A. The Direct taxes Create Civic Sense
B. It is easy to collect the Direct Taxes Therefore They are in accordance with the Principle of economy
C. The Direct Taxes are in Accordance with the Principle of equity because the rich have to pay such taxes while the poor are exempted from such Taxes
D. The Direct Taxes Discourage Unequal Income Distribution. Thus They become Helpful in Removing Unequal Income Distribution
E. The Direct Taxes Meet the Canon of Certainty Hence they Cannot be Avoided
F. They are Flexible in Nature
G. All of the Above

Answer

Correct Answer: G. All of the Above 

 

44. Mention the demerits of Direct Taxes?

A. The Direct Taxes are Imposed on Incomes, Hence they are Cumbersome for the Tax Payer
B. They are Prey to Evasion
C. Such Taxes are imposed on Incomes, Profits or wealth. Therefore the TaxPayers have to prepare the Balance Sheets or Accounts of their Incomes. Moreover, the Amount of Tax has to be computed with Complicated Formulas. All such May Create a lot of Inconveniences for the Tax Payers
D. The Direct Taxes are furnished with Uncertainty, because Along with Increase in Incomes the Tax Rates also Increase. Consequently, people are always Found Busy in Concealing Their Incomes, In this way Govt, Revenue Estimation may be Incorrect
E. All of these

Answer

Correct Answer: C. Such Taxes is imposed on Incomes, Profits or wealth. Therefore the TaxPayers have to prepare the Balance Sheets or Accounts of their Incomes. Moreover, the Amount of Tax has to be computed with Complicated Formulas. All such May Create a lot of Inconveniences for the TaxPayers 

 

45. Mention the merits of Indirect Taxes?

A. It is Easy to pay the Indirect Taxes Because the TaxPayers Pay Such Taxes Along with the Price of the Good
B. The Payment of Indirect Taxes Can not be Avoided. Thus the Revenue from Indirect Taxes are Certain
C. These Taxes are Flexible. As the Production Increase or the Expenditures Increase the Revenue Earned through Such Taxes Would also Increase
D. With the help of Indirect Taxes the use of Unnecessary and Injurious Goods can be discouraged. Therefore, Such Taxes become helpful in Raising Social Welfare
E. Indirect Taxes are imposed on all the Segments of the Society. Therefore each Section of the Society Contributes
F. All of the above

Answer

Correct Answer: F. All of the above

 

46. Mention the demerits of Indirect taxes:

A. The Indirect Taxes are Generally of Consumption Nature. Therefore, their Burden is Mostly Felt by the Poor Class. It is Because that the Poor and the Rich have to pay the same amount of Tax
B. The Indirect taxes lead to Create Uncertainty in Govt. Revenues. It is because that Such Taxes Increase the Prices of Goods Reducing Their Demand
C. The Indirect Taxes Increase Inflation in the Economy, Thus, they are the Source of Social Dissatisfaction
D. The Indirect Taxes Do not Create Civic Sense
E. All of the above

Answer

Correct Answer: E. All of the above

 

47. Mentions the demerits of Progressive Taxes:

A. The Progressive Taxes are imposed on this Assumption that National Wealth of Money has Gone Down for the Risk. Therefore, Taxing them will not be Burdensome
B. The Progressive Taxes Bring Equality in the Distribution of Income
C. The Progressive Taxes Lead to Boost Govt, Revenues. Particularly these taxes are More helpful in Enhancing Revenues During Wars and Emergencies
D. GOvts. Do not have to face More Expenses While Collecting Such Taxes
E. They are in accordance with the Canon of Flexible
F. They Meet the Requirements of Social Justice and Economic Welfare
G. All of the above

Answer

Correct Answer: G. All of the above

 

48. Mention the demerits of Progressive Taxes?

A. It is Difficult to Assess that MU of Money for the Rich has Gone Down it may Happen that any Person has more Income but the Number of his Dependents is also more. In such a Situation, How the MU of Money will be assessed
B. The Progressive Taxes Discourage Saving and Investment. Thus They badly Affect Capital Accumulation
C. They are Often Prey to Evasion
D. All of the these

Answer

Correct Answer: D. All of these

 

49. Name the tax whose rate falls along with an increase in income of the people?

A. Progressive Tax
B. Regressive Tax
C. Specific Tax
D. Digressive Tax

Answer

Correct Answer: B. Regressive Tax 

 

50. Which tax is called Combination of Progressive and Proportional Taxes?

A. Digressive Tax
B. Regressive Tax
C. Specific Tax
D. Value Added Tax

Answer

Correct Answer: A. Digressive Tax 

 

51. Mention the merits of Proportional Taxes?

A. Each Tax Payer Easily Assess the Amount of Tax
B. It is Simple and easy Understood
C. As a Result of Such Taxes there does not Occur Big Changes in the Distribution of Income and Wealth, in this way, the Social and Economic Life of a Country will not Change
D. All of these

Answer

Correct Answer: D. All of these 

 

52. Mention the demerits of proportional taxes?

A. The Burden of Proportional Taxes is with poor Segment of the Society. It is a Fact that MU of Money Goes Down for the Rich; if Both Rich and the Poor are Taxes Equally their Sacrifice will be same it will be Illogical.
B. As a Result of Such Taxes the Unequal Income Distribution will not come to an End Rather the Guilt Between the Rich and the Poor will Increase
C. As a Result of Such Taxes the Unequal income Distribution will not come to end Rather the Gulf Between the Rich and the poor will Increase
D. Such Tax Also Contradicts “Capacity Theorem” which States that Evert Body Should be taxed according to his Capacity
E. This Tax is against the Principle of Flexibility. As a Result Govt. Fails to Acquire Enough Tax Revenue
F. All of these

Answer

Correct Answer: F. All of these 

 

53. What is ‘Value Added tax’ related to?

A. Property Tax
B. Excise Duty
C. Sales Tax
D. None of these

Answer

Correct Answer: C. Sales Tax 

 

54. What are the merits of Value Added Tax?

A. It remains Neutral in its Effects on Sales and Production. Because such tax is Imposed Just on the net Addition. On the Other Side, the Turn over Tax is Imposed on each Stage of Transaction
B. As a Result of VAT there are Reduced Chances of Tax Evasion
C. These Taxes become Helpful in Promoting a Country Exports. In order to Attain Comparative Advantage, Govts. Often Refund those Amount of Taxes Which became Responsible for Adding the values of Goods
D. All of these

Answer

Correct Answer: D. All of these 

 

55. Mention the demerits of Value Added Tax?

A. It is a very Complicated Tax System Particularly for the Developing Countries Here the Tax Machinery is Corrupt and Inefficient, Cannot properly Assess the Value Addition. Then how it will Impose Taxes on the Values of the Goods Added
B. This Tax Could be Imposed Properly if Firms properly Prepare their Accounts Regarding the Purchase Price of their Products, Addition in the Prices of their products and Sale Price of their Products
C. The Success of Such Tax lies with the Close Cooperation between firms, Tax Machinery and Govt
D. All of these

Answer

Correct Answer: D. All of these 

 

56. Mention the demerits of Income-tax?

A. Income tax is attached with so many Formulas. It means that amount of Increase Tax is calculated with the help of Complicated Formulas
B. The major Share of the Population Does not get itself Registered a Tax Payers. As a result, the Tax base remains Limited
C. The Tax Machinery has Unlimited Powers. Not only there is a Tax Evasion but the Tax Payers are also Harassed
D. The agn sector is exempted from Income Tax
E. All of these

Answer

Correct Answer: E. All of these 

 

57. Give the major taxation theories?

A. Benefit Received Theory
B. Capacity to Pay Theory
C. Sacrifice Theory
D. All of these

Answer

Correct Answer: D. All of these 

 

58. The distribution of resources amongst provinces is made through:

A. National Finance Commissioner (NFC)
B. National Co-ordination Committee
C. National Equal Authority
D. None of these

Answer

Correct Answer: A. National Finance Commissioner (NFC) 

 

59. NFC established in:

A. 1995
B. 1996
C. 1997
D. 1998

Answer

Correct Answer: C. 1997 

 

60. What are the major components of direct taxes?

A. Collection On Demand (COD)
B. Voluntary Payment (VP)
C. Withholding Tax (WTs)
D. All of these

Answer

Correct Answer: D. All of these 

 

61. During the period of Henry VIII the silver coins emerged as “Bad Money”. Good money considered which type of coins?

A. Cupper
B. Gold
C. Bronze
D. None of these

Answer

Correct Answer: B. Gold 

 

62. What is the importance of money?

A. It has put to an end the Dements of Batter System
B. The Scope of money is Extended over to consumption Production Distribution and Public Finance Money is much Helpful for Consumers and Distribution and Public Finance. Money is much Helpful for Consumers and Distribution and has Facilitated the Process of Distribution and Exchange
C. The Price Mechanism Runs on the Basis of Money. As labor works for wages and a producer for Profits. He wages or the Profits are Expressed in the Form of Money
D. According to Keynes it is Money that can Influence the Level of Income and Employment. While the Classical Considered it just a Medium of Exchange Now we Discuss it in Detail
E. All of these

Answer

Correct Answer: E. All of these 

 

63. LM curve means:

A. It Shows Different Combination of Rate of Interest
B. It Shows the Nature of National Income of the Country
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

64. Baumol’s Transaction theory relates to:

A. Debt
B. Definition
C. Demand for Money
D. None of these

Answer

Correct Answer: C. Demand for Money 

 

65. Tobin’s regressive expectations model is for:

A. Fixation of Tax Rate
B. Demand for Money
C. Determination of Value Added Tax
D. None of these

Answer

Correct Answer: B. Demand for Money 

 

66. Friedman in his quality theory of money mentions which type of components of Demand for money?

A. Utility of Holding Money
B. Income Constrains
C. Cost of Holding Money
D. All of these

Answer

Correct Answer: D. All of these 

 

67. Economic effects are:

A. Government Use Fiscal Policy to Influence the level of Aggregate Demand in the Economy. In an effort to achieve Economic Objectives of Price Stability, Full Employment, and Economic Growth
B. Keynesian Economic Suggestions that Increasing Government Sending and Decreasing Tax Rates are the Best Ways to Stimulate Aggregate Demand and Decreasing Spending & Increasing Taxes after the Economic Boom Begins
C. Keynesian Argue this Method be used in times of Recession or Low Economic Activity as an Essential tool for building the framework for strong Economic Growth and Working Towards full employment in Theory the Resulting Deficits Would be paid for by an expanded economy during the boom that would follow this Was the Reasoning behind the new Deal
D. Government can use a budget surplus to do two things to slow the pace of Strong Economic Growth and to Stabilize prices when inflation is too high Keynesian Theory Posits that removing spending from the Economy will reduce the level of Aggregate demand and Contract the Economy thus the economy will reduce levels of
E. All of these

Answer

Correct Answer: E. All of these 

 

68. What are the major Functions of the Central Bank?

A. It will Create a Uniformity Amongst the Notes in Circulation
B. The Govt Backing will lead to Create confidence in Currency
C. The Central Back will be able to Control the Operations of Commercial Banks in a Batter Way
D. All of these

Answer

Correct Answer: D. All of these 

 

69. Mention the major features of Friedman’s QTM?

A. The Demand for money is Influenced by changes in the level of Real NI
B. The Demand for Money is Influenced by Changes in Rate of Interest
C. The Demand for money is Influenced by Changes in Price Level
D. When money market is in equilibrium Md = Ms
E. The Changes in Supply of money result in Changing I, P, and y. Ultimately the Demand for money Changes and Ms = Md
F. All of these

Answer

Correct Answer: F. All of these 

 

70. It is a situation where the general price level increased persistently and the value of money Goes to fall it is called as:

A. Inflation
B. Deflation
C. Both a & b
D. None of these

Answer

Correct Answer: A. Inflation 

 

71. Who said that “Inflation is a state in which the value of money falls and price level persistently rise?

A. Professor Crowther
B. Professor Ackly Gardner
C. Professor Pigou
D. None of these

Answer

Correct Answer: A. Professor Crowther 

 

72. Who defines inflation as inflation is a persistent and appreciable rise in the general level of average prices?

A. Professor Crowther
B. Professor Pigou
C. Professor Ackley Gardner
D. None of these

Answer

Correct Answer: C. Professor Ackley Gardner 

 

73. Who said that Inflation takes place when price level expends more in proportion to output?

A. Professor Arthur Pigou
B. Professor Crowther
C. Professor Ackley Gardner
D. None of these

Answer

Correct Answer: A. Professor Arthur Pigou 

 

74. The Phillip Curve relates to:

A. Public Debt
B. Income Tax
C. Inflation
D. None of these

Answer

Correct Answer: C. Inflation 

 

75. Mention the major measures to control inflation?

A. Because of Inflation the Real Output, Relative Prices, Interest Rates and the Reserves From Taxes all are Affected
B. Inflation Discourages the Savings and Encourages Consumption
C. Inflation Leads to Income Inequalities. It promotes Financial Investment Rather Physical Investment
D. Inflation results in the Promotion of Social Events like bribery black-marketing Smuggling, Suicidal Actions, and kidnapping
E. Inflation Encourages Flight of Capital
F. All of these

Answer

Correct Answer: F. All of these 

 

76. “Public Finance is a Science where the Economic Activity of Statesmen is analyzed which they follow to raise material resources in order to perform necessary functions of the state”. Who said that?

A. Karl Pelham (Introduction to Public Finance, 1926)
B. Prof. Armitage Smith (Principles and Methods of Taxation, 1935)
C. Charles Bestable (Public Finance 1903)
D. Harly Leist (Public Finance 1939)

Answer

Correct Answer: A. Karl Pelham (Introduction to Public Finance, 1926) 

 

77. What are the means of Instruments of Fiscal Policy?

A. Changes in the Level and Composition of Taxation
B. Government Spending in Various Sectors
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

78. The changes can affect the macroeconomic variables amongst others in an economy?

A. Aggregate Demand and the Level of Economic Activity
B. Saving and Investment in the Economy
C. The Distribution of Income
D. All of these

Answer

Correct Answer: D. All of these 

 

79. The main stances of Fiscal Policy are:

A. Neural Fiscal Policy
B. Expansionary Fiscal Policy
C. Contractionary Fiscal Policy
D. All of these

Answer

Correct Answer: D. All of these 

 

80. Contractionary Fiscal Policy means:

A. Occurs when Government Spending is Lower than tax Revenue
B. Is usually Undertaken to pay Down Government Debt
C. Both A & B
D. None of these

Answer

Correct Answer: C. Both A & B 

 

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