Indian Economy Textbook Questions – Sources of Revenue · Fiscal Policy · Goods and Services Tax (Part 2)

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Indian Economy Textbook Questions – Sources of Revenue · Fiscal Policy · Goods and Services Tax (Part 2) – 20 questions, subject: Economy. Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.

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1.  
Who decides whether a Bill is a Money Bill?

Correct Answer: C [The Speaker of the Lok Sabha]

Explanation:

Article 110(3): the Speaker of the Lok Sabha's decision is final.

2.  
On which date did the FRBM Act come into force?

Correct Answer: D [5.7.2004]

Explanation:

26.8.2003 = Act (assent); 5.7.2004 = came into force.

3.  
What is the Union's fiscal deficit target for 2026-27 BE (as % of GDP)?

Correct Answer: B [4.3%]

Explanation:

2025-26 Revised Estimate is 4.4%.

4.  
Which fiscal policy suits a recession?

Correct Answer: A [Raising public spending and cutting taxes]

Explanation:

Expansionary policy in a recession; the repo rate is a monetary tool.

5.  
Who put forward the idea of the “vicious circle of poverty”?

Correct Answer: D [Ragnar Nurkse]

Explanation:

"A country is poor because it is poor."

6.  
Which Article provides for the GST Council?

Correct Answer: C [279A]

Explanation:

246A = power to make GST laws; 269A = IGST.

7.  
Which of the following is outside GST?

Correct Answer: B [Petrol]

Explanation:

Tobacco is within GST (40%).

8.  
What is the turnover limit of the composition scheme for suppliers of goods?

Correct Answer: D [₹1.5 crore]

Explanation:

₹75 lakh = special category States; ₹40 lakh = registration limit.

9.  
Assertion (A): Disinvestment proceeds are capital receipts.
Reason (R): They reduce the government's assets.
கூற்று–காரண வினாக்களுக்கான தேர்வுகள்
(A) கூற்றும் காரணமும் சரி; காரணம் கூற்றுக்குச் சரியான விளக்கம்
(B) கூற்றும் காரணமும் சரி; ஆனால் காரணம் சரியான விளக்கம் அல்ல
(C) கூற்று சரி; காரணம் தவறு
(D) கூற்று தவறு; காரணம் சரி
Options for Assertion–Reason questions
(A) Both A and R are true; R is the correct explanation of A
(B) Both A and R are true; R is not the correct explanation of A
(C) A is true; R is false
(D) A is false; R is true

Correct Answer: A []

Explanation:

A receipt that creates a liability or reduces assets = capital receipt.

10.  
Assertion (A): Indian income tax is a progressive tax.
Reason (R): It is based on the ability-to-pay principle.

Correct Answer: A []

Explanation:

The rich paying a higher rate is the ability-to-pay principle.

11.  
Which statements on theories of public expenditure are correct?
  1. The Peacock–Wiseman hypothesis was published in 1961.
  2. Expenditure raised in a crisis does not fall back to the old level afterwards (displacement effect).
  3. Wagner was a French economist.

Correct Answer: A [1, 2 only]

Explanation:

Adolph Wagner was German.

12.  
Which of the following statements are correct?
  1. Since 2017 the Union Budget is presented on 1 February.
  2. The Railway Budget was merged with the General Budget in 2017.
  3. The Rajya Sabha can reject a Money Bill.

Correct Answer: C [1, 2 only]

Explanation:

The Rajya Sabha cannot reject or amend a Money Bill; it can only make recommendations.

13.  
Assertion (A): Deficit financing through money creation may cause inflation.
Reason (R): It raises money supply without a matching rise in output.

Correct Answer: A []

Explanation:

More money, same quantity of goods ➜ prices rise.

14.  
Revenue expenditure ₹100, capital expenditure ₹25, revenue receipts ₹80, non-debt capital receipts ₹5, interest payments ₹10 (crore). What is the primary deficit?

Correct Answer: B [₹30 crore]

Explanation:

Fiscal deficit = 125 − 85 = 40; primary = 40 − 10 = 30; revenue deficit = 20.

15.  
Which of the following statements are correct?
  1. The repo rate is a fiscal policy tool.
  2. Public debt is a fiscal policy tool.
  3. A contractionary fiscal policy is used to control inflation.

Correct Answer: B [2, 3 only]

Explanation:

The repo rate is a monetary policy tool.

16.  
Assertion (A): In India, fiscal policy is implemented by the RBI.
Reason (R): The repo rate is decided by the RBI's Monetary Policy Committee.

Correct Answer: D []

Explanation:

Fiscal policy = government; A is false, R is true.

17.  
Which statements about the GST Council are correct?
  1. A decision needs three-fourths of the weighted votes of those voting.
  2. The Union's vote carries one-third weight.
  3. The quorum is one-third of the total members.

Correct Answer: C [1, 2 only]

Explanation:

Quorum = half of the total members.

18.  
Match the following:
a. 1.7.20171. 56th GST Council meeting
b. 101st Amendment2. 2016
c. GSTAT3. 24.9.2025
d. 3.9.20254. GST comes into force

Correct Answer: C [4 2 3 1]

Explanation:

GST in force 1.7.2017; 101st Amendment 2016; GSTAT 24.9.2025; 56th meeting 3.9.2025.

19.  
After 22.9.2025, the GST on a ₹100 toilet-soap bar bought within Tamil Nadu is:

Correct Answer: B [CGST ₹2.50 + SGST ₹2.50]

Explanation:

5% = 2.5% + 2.5%; no IGST within a State.

20.  
Assertion (A): GST removes the cascading effect.
Reason (R): Input tax credit lets tax paid on inputs be set off.

Correct Answer: A []

Explanation:

No tax on tax; at each stage only the value added is taxed.

? Full lessons and explanations – Indian Economy PDF textbook (₹299): www.shanmugamiasacademy.in/study-materials/tnpsc-gs-unit-5-indian-economy

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