CA Foundation Paper 4

Money and Financial Markets MCQ

Chapter 7 • 89 Questions from ICAI Study Material

Questions

89

Est. Time

67 min

Exam Weight

12-15%

Source

ICAI Book

Sample Questions: Money and Financial Markets

Preview 8 of 89 MCQs from Chapter 7

1. Redistribution policies are likely to have efficiency costs because

A) They will reduce the efficiency of governments
B) They may create disincentives to work and save ✓
C) Governments have to forego taxes
D) They are likely to make the poor people dependent on the rich

2. Macroeconomic stabilization may be achieved through

A) Free market economy
B) Fiscal policy
C) Monetary policy
D) (b) and (c) above ✓

3. Which of the following policies of the government fulfils the redistribution function

A) Parking the army on the northern borders of the country
B) Supply of food grains at subsidized prices to the poor people ✓
C) Controlling the supply of money through monetary policy
D) All of the above

4. Choose the correct statement

A) Fiscal policy involves the use of changes in taxation and government spending; PUBLIC FINANCE while monetary policy involves the use of price and profit controls.
B) Fiscal policy involves the use of price and profit controls; while monetary policy involves the use of taxation and government spending.
C) Fiscal policy involves the use of changes in taxation and government spending; while monetary policy involves the use of changes in the supply of money and interest rates. ✓
D) Fiscal policy involves the use of changes in the supply of money and interest rates; while monetary policy involves the use of changes in taxation and government spending.

5. The justification for government intervention is best described by

A) The need to prevent recession and inflation in the economy
B) The need to modify the outcomes of private market actions
C) The need to bring in justice in distribution of income and wealth
D) All the above ✓

6. Public goods will not be produced in sufficient quantities in a market economy Of the three statements above:

A) 1,2 and 3 are correct
B) 1 and 3 are correct ✓
C) 2 and 3 are correct
D) 3 alone is correct

7. When a government offers unemployment benefits and also resorts to progressive taxation which function does it seem to fulfill?

A) It is trying to establish stability in an economy
B) It is trying to redistribute income and wealth ✓
C) It is trying to allocate resources to their most efficient use
D) It is creating a source of market failure

8. Government of Emeline Land decides to provide most modern road infrastructure throughout the nation. This can be classified as

A) Distribution function
B) Allocation function ✓
C) Stabilization function
D) None of the above