While releasing the data relating to inflation increased by the Govt, it is observed that

1) The consumer price index based inflation increased to 11% and

2) Whole sale price index based inflation increased to 8%

3) The govt. claims that due to implementation of Banks Bi-partite Settlement, there is increase in demand of goods and services leading to increase in consumer prices.

4) Further due to increased wages and salaries, there is increase in cost of inputs leading to increase in whole-sale price index.

Answer the following questions, based on the above information.

1. The inflation caused by the the information given at point no.3 in the question, is not called as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation

a. Only (i) and (ii)

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

Ans - b

2. The inflation rate of 8%, represented by the whole sale price, is called:

a. Core inflation

b. Headline inflation

c. Demand Pull inflation

d. Cost-push inflation

Ans - b

3. The inflation rate 11% represented by the consumer price, is called:

a. Core inflation

b. Headline inflation

c. Demand Pull inflation

d. Cost-push inflation

Ans - a

4. The inflation caused by the information given at point no.4 in the question, is not called as ...... (i) Core inflation, (ii) Demand Pull inflation (iii) Cost-push inflation

a. Only (i) and (ii)

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

Ans - a

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Given,

Corporation tax - Rs. 1000 Crores

Income tax - Rs. 800 Crores

Other taxes and duties - RS. 600 Crores

Customs - RS. 800 Crores

Union exercise tax - Rs. 600 Crores

Service tax - Rs. 500 Crores

Tax of union territories- Rs. 300 Crores

Interst receipt - Rs. 500 Crores

Devident & profit - Rs. 700 Crores

External grant - Rs. 300 Crores

Other non tax revenue - Rs. 1000 Crores

State Share - Rs. 600 Crores

Receipt of union territories - Rs. 800 Crores

Trf to NCCD (National calamity Contingency fund) - Rs. 300 Crores

1. Calculate Gross Tax Revenue

a. Rs 3800 Crores

b. Rs 4300 Crores

c. Rs 4600 Crores

d. Rs 5600 Crores

Ans - c

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2. Calculate Net Tax revenue

a. Rs 2900 Crores

b. Rs 3700 Crores

c. Rs 4000 Crores

d. Rs 4600 Crores

Ans - b

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Solution :

1. Gross Tax revenue = Corporation Tax + Income tax + other tax & duties + costoms + union excise duties + service Tax + taxes on union territories

= 1000+800+600+800+600+500+300

= 4600 Crores

2. Net Tax Revenue = Gross tax revenue - NCCD transferred to the National Calamity Contingency fund - state share

= 4600-300-600

= 3700 Crores

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From the following data (Rs.in crore)

Net current transfers from abroad - (–)5

Private final consumption expenditure - 250

Net factor income from abroad - 15

Government final consumption expenditure - 50

Consumption of fixed capital - 25

Net exports - (–)10

Subsidies - 10

Net domestic capital formation - 30

Indirect tax - 20

1. Calculate Net Domestic Product at Factor Cost

a. 280 crore

b. 310 crore

c. 330 crore

d. 355 crore

Ans - b

2. Calculate Gross National Disposable Income

a. 280 crore

b. 310 crore

c. 330 crore

d. 355 crore

Ans - d

Explanation :

1. Net Domestic Product at Factor Cost = Private final consumption expenditure + Government final consumption expenditure + Net domestic capital formation + Net exports – Indirect taxes + Subsidies

= Rs. 250 crore + Rs. 50 crore + Rs. 30 crore + (–) Rs. 10 crore – Rs. 20 crore + Rs. 10 crore

= Rs. 310 crore

2. Gross National Disposable Income = NDPFC + Net current transfers from abroad + Net indirect taxes + Consumption of fixed capital + Net factor income from abroad

= Rs. 310 crore + (–) Rs. 5 crore + ( Rs. 20 crore – Rs. 10 crore) + Rs. 25 crore + Rs. 15 crore

= Rs. 310 crore – Rs. 5 crore + Rs. 10 crore + Rs. 25 crore + Rs. 15 crore

= Rs. 355 crore

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Given the following data (Rs. in Arab) about a government budget

Capital Receipts Net of Borrowings - 95

Revenue Expenditure - 100

Interest Payments - 10

Revenue Receipts - 80

Capital Expenditure - 110

1. Find out the Revenue deficit

a. Rs. 20 Arab

b. Rs. 25 Arab

c. Rs. 35 Arab

d. Rs. 40 Arab

Ans - a

2. Find out the Fiscal deficit

a. Rs. 20 Arab

b. Rs. 25 Arab

c. Rs. 35 Arab

d. Rs. 40 Arab

Ans - c

3. Find out the Primary deficit

a. Rs. 20 Arab

b. Rs. 25 Arab

c. Rs. 35 Arab

d. Rs. 40 Arab

Ans - b

Solution

1. Revenue Deficit = Revenue Expenditure – Revenue Receipts

= 100 - 80

= Rs. 20 Arab

2. Fiscal Deficit = [Revenue Expenditure + Capital Expenditure] – [Revenue Receipt + Capital Receipt Net of Borrowing]

= (100 + 110) - (80 + 95)

= 210 - 175

= Rs. 35 Arab

3. Primary Deficit = Fiscal Deficit – Interest Payments

= 35 - 10

= Rs. 25 Arab

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From the following data (Rs.in crore)

Net national product at market price - 1,015

Income from property and entrepreneurship accruing to government administrative departments - 25

Indirect taxes - 150

Subsidies - 20

Saving of non-departmental enterprises - 5

National debt interest - 10

Current transfers from government - 25

Current transfers from rest of the world - 10

Saving of private corporate sector - 15

Corporate profit tax - 10

1. Calculate National Income

a. 875 crore

b. 885 crore

c. 900 crore

d. 975 crore

Ans - b

2. Calculate Personal Income

a. 875 crore

b. 885 crore

c. 900 crore

d. 975 crore

Ans - a

3. Calculate Private Income

a. 875 crore

b. 885 crore

c. 900 crore

d. 975 crore

Ans - c

Explanation :

1. National Income = Net national product at market price – Indirect taxes + Subsidies

= Rs. 1,015 crore – Rs. 150 crore + Rs. 20 crore

= Rs. 885 crore

2. Personal Income = National income – Income from property and entrepreneurship accruing to government administrative departments – Saving of non-departmental enterprises + National debt interest + Current transfers from government + Current transfers from rest of the world – Saving of private corporate sector – Corporate profit tax

= Rs. 885 crore – Rs. 25 crore – Rs. 5 crore + Rs. 10 crore + Rs. 25 crore + Rs. 10 crore – Rs. 15 crore – Rs. 10 crore

= Rs. 875 crore

3. Private Income = Personal income + Saving of private corporate sector + Corporate profit tax

= Rs. 875 crore + Rs. 15 crore + Rs. 10 crore

= Rs. 900 crore

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From the following data estimate (Rs.in crore)

Net national product at market price - 1,400

Net factor income from abroad - (–)20

Gross national product at factor cost - 1,300

Consumption of fixed capital - 100

National debt interest - 18

1. Net Indirect Taxes

a. 100 crore

b. 180 crore

c. 200 crore

d. 218 crore

Ans - c

2. Net Domestic Product at Factor Cost:

a. 1,220 crore

b. 1,280 crore

c. 1,320 crore

d. 1,380 crore

Ans - a

Explanation :

1. Net Indirect Taxes = Net national product at market price – Net national product at factor cost (Gross national product at factor cost – Consumption of fixed capital)

= Rs. 1,400 crore – (Rs. 1,300 crore – Rs. 100 crore)

= Rs. 1,400 crore – Rs. 1,300 crore + Rs. 100 crore

= Rs. 200 crore

2. Net Domestic Product at Factor Cost = Gross national product at factor cost – Consumption of fixed capital – Net factor income from abroad

= Rs. 1,300 crore – Rs. 100 crore – (–) Rs. 20 crore

= Rs. 1,300 crore – Rs. 100 crore + Rs. 20 crore

= Rs. 1,220 crore

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From the following data (Rs.in crore)

Compensation of employees - 800

Rent - 200

Wages and salaries - 750

Net exports - (–)30

Net factor income from abroad - (–)20

Profit - 300

Interest - 100

Depreciation - 50

Remittances from abroad - 80

Taxes on profits - 60

Calculate National Income

a. 1,080 crore

b. 1,180 crore

c. 1,380 crore

d. 1,480 crore

Ans - c

Explanation :

National Income = Compensation of employees + Rent + Profit + Interest + Net factor income from abroad

= Rs. 800 crore + Rs. 200 crore + Rs. 300 crore + Rs. 100 crore + (–) Rs. 20 crore

= Rs. 1,380 crore

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