Economy, Business and the Budget — Practice

Question 1

Passage: The central bank left the repo rate unchanged, signalling caution as it weighed inflation against growth.
The repo rate is the rate at which:
(a) the RBI lends to commercial banks (b) banks lend to their customers (c) the government borrows from the public (d) banks lend to one another

Accepted Answer

(a) the RBI lends to commercial banks.

The repo rate is the rate at which the RBI lends short-term funds to commercial banks. (b) is the banks' lending rate to customers, (c) is government borrowing, and (d) is the call-money market — none is the repo rate.

Question 2

Passage: The Finance Minister rose in Parliament to present the annual Budget, as is customary at the start of February.
The Union Budget is customarily presented on:
(a) 1 February (b) 1 April (c) 15 August (d) 31 March

Accepted Answer

(a) 1 February.

Since 2017 the Union Budget has customarily been presented on 1 February. (b) is the start of the financial year, (c) is Independence Day, and (d) is the last day of the financial year — none is Budget day.

Question 3

Passage: The article grouped the country's taxes into those borne directly by earners and those collected on goods and services.
Which of the following is an indirect tax?
(a) Goods and Services Tax (b) income tax (c) corporate tax (d) capital gains tax

Accepted Answer

(a) Goods and Services Tax.

GST is an indirect tax on goods and services, passed on to the consumer. (b), (c) and (d) are direct taxes that fall on the income or gains of the person taxed.

Question 4

Passage: The Budget documents highlighted the fiscal deficit as the key number markets would watch.
The fiscal deficit is best described as:
(a) the gap between the government's total expenditure and its total receipts excluding borrowings (b) the country's total accumulated public debt (c) the gap between exports and imports (d) the difference between revenue and capital spending

Accepted Answer

(a) the gap between the government's total expenditure and its total receipts excluding borrowings.

The fiscal deficit shows how much the government must borrow in the year. (b) is total public debt, (c) is the trade deficit, and (d) is an internal Budget split — none is the fiscal deficit.

Question 5

Passage: Following irregularities in share trading, the market regulator tightened its disclosure norms for listed companies.
Which body regulates the securities market in India?
(a) SEBI (b) RBI (c) IRDAI (d) TRAI

Accepted Answer

(a) SEBI.

The Securities and Exchange Board of India regulates the securities and stock markets. (b) regulates banking, (c) insurance, and (d) telecom — none oversees the share market.

Question 6

Passage: The Council that decides GST rates met to review the slabs, with the Union Finance Minister in the chair.
Who chairs the GST Council?
(a) The Union Finance Minister (b) The RBI Governor (c) The Prime Minister (d) The President of India

Accepted Answer

(a) The Union Finance Minister.

The GST Council, which decides rates and rules, is chaired by the Union Finance Minister, with state finance ministers as members. (b), (c) and (d) do not chair the Council.

Question 7

Passage: To manage liquidity, the central bank also adjusts the ratio of deposits that banks must park with it.
The Cash Reserve Ratio (CRR) is:
(a) the share of deposits banks must keep with the RBI (b) the interest banks pay on savings accounts (c) a tax on cash withdrawals (d) the rate at which the RBI lends to banks

Accepted Answer

(a) the share of deposits banks must keep with the RBI.

The CRR is the portion of their deposits that banks must hold with the RBI, a tool to control liquidity. (b) and (c) are unrelated, and (d) describes the repo rate, not the CRR.

Question 8

Passage: The report drew a line between the government's decisions on how much to tax and spend and the central bank's decisions on interest rates.
Decisions on government taxation and spending form part of:
(a) fiscal policy (b) monetary policy (c) trade policy (d) industrial policy

Accepted Answer

(a) fiscal policy.

Taxation and government spending are the instruments of fiscal policy, set by the government through the Budget. (b) monetary policy concerns interest rates and money supply and is the RBI's domain; (c) and (d) address trade and industry specifically.

Practice — Economy, Business and the Budget

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