Indian Economy MCQs

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Entertainment Tax is listed under Entry 62 of List II (State List) in the Seventh Schedule of the Indian Constitution. Only state governments could levy and collect this tax before the introduction of Goods and Services Tax in July 2017. Post-GST, most components of Entertainment Tax were subsumed under GST, but states retained powers for some local bodies and specific categories.

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Money multiplier is expressed as a ratio between broad money (M3) and Reserve money (M0). It refers to how an initial deposit can lead to a bigger final increase in the total money supply.

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In India, a new private bank is legally incorporated under the Companies Act 2013 as a banking company. The Companies Act 2013 governs formation, registration, and operation of companies in India. Banks must first be incorporated as companies before applying for a banking license from the Reserve Bank of India. The Companies Act 2013 replaced the Companies Act 1956.

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The Reserve Bank of India (RBI) is the primary regulator for Housing Finance Companies (HFCs) in India, having taken over these powers from the National Housing Bank (NHB) in 2019. While the NHB remains responsible for the supervision and development of the housing finance sector, regulatory authority, including licensing and setting prudential norms, rests with the RBI.   In 2019, the Finance Act 2019 amended the National Housing Bank Act, 1987, transferring regulatory control from the NHB to the RBI to ensure uniform regulation of all lending institutions.

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Phillips curve developed by A. W. Phillips says that the inflation and unemployment have a stable and inverse relationship; which means that higher inflation is associated with lower unemployment and vice versa. However, later it was proved that this curve is applicable only in the short-run, and in long-run, inflationary policies would not decrease unemployment.

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Cross-selling involves suggesting additional complementary products to a customer’s original purchase. In fast-food chains, offering fries with a sandwich exemplifies this. According to retail practices adopted since the 1970s, cross-selling combos are widely used to increase overall sales figures. Major restaurant chains such as McDonald’s and Burger King commonly use this technique globally.

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The ability to pay principle is a basis for progressive taxation, taxing individuals according to their income levels. Progressive tax rates increase as income rises under this principle. India’s income tax is based on this principle, with tax slabs laid down in the Income Tax Act, 1961. Most modern tax systems, including those of the UK and India, use this approach.

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The Washington Consensus refers to a set of economic policy prescriptions for developing countries, primarily focused on market-oriented reforms. It was formulated in the late 1980s and emphasizes trade liberalization, deregulation, and privatization. While the International Monetary Fund (IMF) and the World Bank are often associated with the Consensus due to their roles in providing financial assistance and policy advice, the World Trade Organization does not embody the trade liberalization aspect central to the Consensus. The US Treasury Department and the US Federal Bank are not a part of the Washington Consensus framework.

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An equity fund is a pooled investment scheme that invests predominantly in shares of companies. SEBI regulations in India require at least 65% of total assets in equities or equity-related instruments for classification as an equity fund. These funds seek long-term capital appreciation by investing in listed companies. Returns depend on market performance and Net Asset Value. Equity funds do not offer guaranteed or fixed returns.

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The correct answer is the Banking Regulation Act. This act governs the operations of banking companies in India and allows them to engage in non-banking activities, provided these are in accordance with the provisions set forth. The act was enacted in 1949 to regulate the banking sector and ensure financial stability. It also empowers the Reserve Bank of India to oversee and regulate banking operations.