243 PGTRB Economics Study Material 2 1

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Dr. A. THANGAVEL WIN ACADEMY KUMBAKONAM
9486 474777 PUBLIC FINANCE PGTRB COACHING
PRACTICE PAPER - 2
8. Case budget is based on
1. To spend money from State Consolidated (a) accural basis
fund, approval of which authority is needed (b) Realised basis
(a) Parliament (c) Both a & b
(b) State legislature (d) None of the above
(c) Prime Minister
(d) Chief Minister 9. In case of cash budget, funds which are not
owned by government but used is
2. Expenditure of government from (a) Excluded
contingency fund should be such (b) Included
(a) Which can't be delayed (c) Ignored
(b) Which are of emergency nature (d) None of the above
(c) Both (a) & (b)
(d) None of the above 10. Items which are of recurring nature are
covered under
3. Which type of approval is needed from Par- (a) Capital budget
liament before spending from contingency (b) Revenue budget
fund? (c) Cash budget
(a) Prior approval (d) None of the above
(b) Post approval
(c) (a) &(b) 11. Purchase and disposal of fixed assets is
(d) None of the above covered under
(a) Capital budget
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4. Funds which do not belong to the govern-
ment are
(a) Contingency fund
(b) Consolidated fund
(c) Public Accounts
(b) Revenue budget
(c) Cash budget
(d) None of the above
12. Salary of government employee is a part of

(d) None of the above (a) Capital budget
(b) Revenue budget
5. Evaluation of specialised functions of (c) Both a & b
government is possible in case of (d) None of the above
(a) Multiple budget
(b) Single budget 13. Inflation before full employment is reached
(c) Unified budgets is called
(d) None of the above (a) Full inflation
(b) Partial inflation
6. Conventional budget is based on (c) Both (a) & (b)
(a) accural basis (d) None of the above
(b) Realised basis
(c) a & b 14. Inflation is the long run can be sustained if
(d) None of the above (a) Income rise
(b) Money supply increase
7. As compared to conventional budget, cash (c) Consumption rise
budget is (d) Saving rise
(a) Smaller
(b) Larger 15. Quantity theory of money holds goods at
(c) Same level where
(d) Can't say with certainty (a) There is full employment
(b) Unemployment
(c) Disguised unemployment
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(d) Frictional unemployment 24. When executive government is not able to
16. Inflation of around 3% increase in price continue for the full year because elections
level per year is called are due, which type of budget is passed?
(a) Hyper inflation (a) Lame duck budget
(b) Galloping inflation (b) Contingency budget
(c) Creeping inflation (c) Emergency budget
(d) None of the above (d) None of the above
17. If mild inflation is not checked, then it will 25. What is the duration of budget plan in India
lead to (a) One year
(a) Hyper inflation (b) Two years
(b) Galloping inflation (c) Three years
(c) Creeping inflation (d) Four years
(d) None of the above 26. What is the duration of budget plan in
America?
18. Indian economy is facing problem of (a) One year
(a) Hyper inflation (b) Two years
(b) Creeping inflation (c) Three years
(c) Galloping inflation (d) Four years
(d) Deflation
27. How much tax can be raised by government
19. Inflation of above 50% per month is called without approval of parliament
(a) Hyper inflation (a) Nil
(b) Creeping inflation (b) 50,000 crores
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(c) Galloping inflation
20. Where price line goes out of the control of

monetary authority, it is called
(c) One billion
28. All the funds which belong to government

go to
(a) Hyper inflation (a) Contingency Account
(b) Creeping inflation (b) Public Account
(c) Walking inflation (c) Private Account
(d) Galloping inflation (d) Consolidated Fund
29. Expenditure on consolidated fund has to be

21. Partial inflation can exist only in the
approved by
(a) Long run
(a) President
(b) Short run
(b) Prime Minister
(c) Market period
(c) Parliament
(d) Unlimited period
(d) High Court
22. Inflation in underdeveloped country occur 30. Taxes raised are credited into
because of (a) Consolidated fund
(a) Check of demand (b) Contingency fund
(b) High rate of saving (c) Public Accounts
(c) High rate of Investment (d) Private Accounts
(d) Lack of supply
31. Salaries of government servants are paid
23. Which budget in India is passed separately? from
(a) Defence (a) Contingency fund
(b) Airlines (b) Consolidated fund
(c) Atomic energy (c) Public Accounts
(d) Railways (d) Private accounts
32. Which type of approval is needed for Par- 39. Demand pull inflation leads to
liament before spending from consolidated (a) Higher Price level
fund? (b) Lower price
(a) Prior approval (c) Higher unemployment rate
(b) Post approval (d) None of the above
(c) No approval
(d) None of the above 40. Demand pull inflation takes place because
of
33. Which types of expenses are not put to vote (a) Shift in aggregate supply curve
in parliament? (b) Shift in supply curve
(a) Salaries of government servants (c) Shift in demand curve
(b) Salaries of University teachers (d) Shift in aggregate supply curve
(c) Salaries of judges of Supreme court
(d) All the above 41. Cost push inflation takes place due to rise in
(a) Wages
34. Inflation without government control is (b) Profit
called (c) Prices of raw material
(a) Open inflation (d) All of the above
(b) Closed inflation
(c) Suppressed inflation 42. Public finance deals with
(d) None of the above (a) Household budget
(b) Government budget
35. Inflation after removal of government's (c) Company budget
price control is called (d) None of the above
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(a) Open inflation
(b) Closed inflation
(c) Suppressed inflation
43. In India, fiscal year start from
(a) 31st March
(b) 31st April
(c) 1st April
36. Inflation after the end of war is an example (d) 1st March
of
(a) Hyper inflation 44. In India, fiscal year ends on
(b) Deflation (a) 31st March
(c) Suppressed inflation (b) 31st April
(d) Open inflation (c) 1st March
(d) 1st April
37. Excess demand leads to
(a) Demand pull inflation 45. Emergency expenditure are specified under
(b) Cost push inflation (a) Complementary budget
(c) Both (a) & (b) (b) Supplementary budget
(d) None of the above (c) lame duch budget
(d) None of the
38. Demand pull inflation takes place because
of increase in 46. Higher prices accompanied by higher unem-
(a) Wage ployment rate is because of
(b) interest (a) Demand pull inflation
(c) Price of raw material (b) Cost push inflation
(d) Money supply (c) Both (a) & (b)
47. Cost push inflation takes place because of 55. Inflation adversely affect
(a) Shift in aggregate supply curve (a) Profit earners
(b) Shift in supply curve (b) Fixed income earners
(c) Shift in demand curve (c) Speculators
(d) Shift in aggregate demand curve (d) None of the above
48. Philips curve shows the relation between 56. Real balance effect was introduced by
(a) Income and consumption (a) J.M. Keynes
(b) Inflation and Unemployment (b) Pareto
(c) Income and price level (c) A.C. Pigou
49. According to Philips curve, relation between 57. Which of the following is more dangerous
inflation and unemployment rate is (a) Inflation
(a) Negative (b) Deflation
(b) Positive (c) Stagflation
(c) No relation (d) None of the above
58. Deflation leads to
50. Philips curve is sloping (a) Increase in price level
(a) Upward (b) Decrease in price level
(b) Horizontal (c) Constant price-level
(c) Vertical (d) None of the above
(d) Downward
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51. In the long run, Philips cun/e is sloping
(a) Upward
(b) Downward
(c) Vertical
59. Deflation leads to
(a) Depression
(b) Recovery
(c) Boom
(d) Horizontal
60. To tackle deflationary problem, government
52. Vertical slope of Philips curve implies that should implement
stabilisation policy of government is (a) Expansionary policy
(a) Highly effective (b) Deflationary policy
(b) Ineffective (c) Both (a) & (b)
(c) Adverse implication (d) None of the above
61. Inflation leads to
53. Which country faced the problem of hyper- (a) Increase in saving
inflation? (b) Decrease in saving
(a) India (c) Constant saving
(b) Pakistan (d) None of the above
(c) Iran
(d) Brazil
62. Inflation leads to
54. Inflation lead to (a) Equitable distribution of income
(a) Increase in profit (b) Inequitable distribution of income
(b) Decrease in profit (c) No impact on income distribution
(c) Constant profit (d) None of the above
63. Cost push inflation can be solved by 71. Government's increase in administered
(a) Fiscal Measures prices will lead to
(b) Monetary measures (a) Cost push inflation
(c) Direct control (b) Demand pull inflation
(d) None of the above (c) Both (a) & (b)
64. Demand pull inflation can be solved by
(a) Fiscal measure 72. At Vertical Aggregate supply, there exists
(b) Monetary measure (a) 10% unemployment
(c) Direct control (b) 5% unemployment
(d) Both (a) & (b) (c) Natural rate of unemployment
65. Direct measure include
(a) Income policy 73. Inflationary gap was introduced by
(b) Price policy (a) Marshall
(c) Both (a) & (b) (b) J.R. Hicks
(d) None of the above (c) J.M. Keynes
66. Income policy above
(a) Control on government revenue 74. Price policy to control inflation means
(b) Control on corporate revenue (a) Control on prices of inputs
(c) Control on wages and Salaries (b) Control on prices of final products
(d) None of the above (c) Control on prices of raw materials
(d) All the above
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67. Fiscal measure to reduce inflation include
(a) Tax policy
(b) Expenditure policy
(c) Both (a) & (b)
75. J.K. Galbraith is an advocate of
(a) Fiscal measure
(b) Monetary measure
(c) Direct control
68. Monetary measure to reduce inflation
include 76. Milton Freidman is an advocate of
(a) Bank rate (a) Fiscal measure
(b) Cash Reserve ratio (b) Monetary measure
(c) Statutory liquidity ratio (c) Direct control
(d) All the above (d) None of the above
69. Increase in rate of saving will lead to 77. Alvin Hansen is an advocate of
(a) Inflation (a) Fiscal measure
(b) Deflation (b) Monetary measure
(c) Constant Price level (c) Direct control
70. Increase in autonomous investment in case 78. Inflation leads to

when economy is at full employment level (a) Increase in export
will lead to (b) Decrease in export
(a) Inflation (c) Constant export
(b) Deflation (d) None of the above
(c) Constant price
79. In case of inflation, import will 86. Match the following:
(a) Increase A. Full bodied coins 1. Acceptable legally
(b) Decrease to any amount
(c) Remain constant B. Token coins 2. Acceptable legally
(d) None of the above only to a certain sum
C. Limited legal 3. Face value equal to
80. If government wants to reduce tender intrinsic value
unemployment even if it leads to inflation, D. Unlimited legal 4. Face value greater
then it should implement tender than intrinsic
(a) Expansionary policy value
(b) Deflationary policy a) A3, B4, C2 and Dl
(c) Both (a) & (b) b) A3, B2, C3 and Dl
(d) None of the above c) Al, B2, C3 and D4
d) A4, B3, C2 and Dl
81. Increase in monetary deficit will lead to in-
crease in 87. “Disposable income” does not include
a) Money demand a) Business transfer payments
b) High powered money b) Social security benefits
c) Saving c) Corporate dividends
d) Export d) Personal income taxes
82. Net foreign investment is equal to 88. Which one of the following authored the
a) A Total amount of foreign investment in a book 'planned Economy for India’ in 1934?
country a) M.N. Roy
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b) Investment by foreigners during a particular
year
c) Investment by local resident in a foreign
country
d) Investment by the foreigners in this country
b) M. Visweswarayya
c) D.R. Gadgil
d) V.K.R.V. Rao
89. Demand for money consists of

minus investment by resindents of this 1. speculative demand for money
country in foreign countries during a given 2. provision for unforeseen exigencies
time period 3. provision for day-to-day transactions
4. desire to buy more goods and services
83. Population density is the ratio of (a) 1, 2 and 4 only
a) Total population to total ratio of (b) 1, 3 and 4 only
b) Total population to total irrigated land area (c) 2, 3 and 4 only
c) Total population to total urban land area (d) 1, 2 and 3 only
d) Total population to rural land area
90. Assume that households sell Rs. 1000 of
84. Inflationary expectations will lead to government securities of the Central Bank
a) Rise in velocity of money in return for Rs. 1000 in paper currency.
b) Fall in velocity of money If households elect to deposit that paper
c) Constant velocity of money currency in the commercial banking
d) Can't say with certainty system and the reserve requirement is
20%. The money supply increases by
85. Eiasticity of demand demand for money: a) Rs. 1000
a) may be unity b) Rs. 2000
b) may be more than unity c) Rs. 4000
c) may be less than unity d) Rs. 5000
d) all of the above.
91. The secondary securities are the financial 97. Which of the following represents the best
claims issued by the way in which the government increases
a) Financial institutions the paper currency component of the
b) Public money supply?
c) RBI a) Households sell gold to the government
d) Stock exchange in return for currency
b) The government gives newly created
92. High-powered money is currency to households
a) Only banks’ reserves at the central bank c) The government gives paper currency to
b) All loans of banks the banks
c) All loans and securities of banks d) The government exchanges paper
d) Rupees held as legal bank reserves currency for government securities
93. The main advantages that the surplus 98. Which of the following qualities of money
units (lenders) get through buying is essential before it can perform any of its
secondary securities over primary functions?
securities do not necessarily include a) Legal sanction
a) Lower risk b) Acceptability
b) Higher return c) Durability
c) Greater liquidity d) Stability in value
d) More convenience
99. In examining the expansion and
94. Which of the following statement is contraction of the banking system, which
incorrect? of the following is NOT an important one
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a) Money is an asset used in the exchange
of goods and services
b) Money is an asset’ that provides its
owner with liquidity
c) In modern advanced economies money
to consider?
a) Excess reserves
b) Money supply
c) Demand deposits
d) New assets of banks
supply is composed largely of credit
money 100. The Central Bank can decrease the bank
d) In every country money supply has full credit component of the money supply by
gold backing a) lowering the cash reserve requirements
b) increasing the bank rate
95. The financial system helps production, c) lowering the bank rate
capital accumulation and growth by d) none of the above
a) actual savings
b) encouraging savings
c) mobilizing savings
d) allocating them among various common
uses
96. If you offered some securities as ’security’

for a loan you made, you would be
a) buying “on margin”
b) selling short
c) providing collateral
d) none of the above
PRACTICE PAPER - 2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
B C C C A A B B B B A B C B A C B C A A
21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
B D B A A B A D C A B A C A C C A D A D
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
D B C A B B A B A D C B D A B C C B A A
61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80
A B C D C C C D B A A C C D C B A B A A
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
B D A A D A D B D D A D B D A A D B A B
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12. Salary of government employee is a part of

20. Where price line goes out of the control of

28. All the funds which belong to government

29. Expenditure on consolidated fund has to be

70. Increase in autonomous investment in case 78. Inflation leads to

89. Demand for money consists of

96. If you offered some securities as ’security’

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