Economy & Tax — Set 2

Correct Answer: C. Gross National Product

• **Gross National Product** = It measures the total value of goods and services produced by the residents of a country, regardless of where the production takes place. • **Citizens abroad** — GNP includes income earned by citizens abroad but excludes income earned by foreigners within the country. • 💡 Wrong-option analysis: Global Network Price: Incorrect, this is not a recognized economic term for national accounting; General Net Profit: Incorrect, this refers to a company's profit, not a national output measure; Government National Plan: Incorrect, this refers to a government strategy, not an economic measure.

Correct Answer: C. Value Added Tax

• **Value Added Tax** = It is a consumption tax placed on a product whenever value is added at a stage of production and at final sale. • **Most European and many Asian countries** — These countries utilize the VAT system as a primary indirect tax. • 💡 Wrong-option analysis: Virtual Account Transfer: Incorrect, this relates to banking transfers, not taxation; Volume Assessment Toll: Incorrect, this is not a recognized tax term; Variable Asset Tax: Incorrect, this refers to a tax on fluctuating assets, not value addition in the production chain.

Correct Answer: C. Foreign Exchange Management Act

• **Foreign Exchange Management Act** = It replaced FERA in 1999 to facilitate external trade and payments in India. • **1999** — This Act was introduced in this year to simplify the laws relating to foreign exchange in a globalized environment. • 💡 Wrong-option analysis: Financial Equity Monitoring Association: Incorrect, this is not the full form of FEMA; Federal Economic Management Agency: Incorrect, this is not the full form of FEMA; Foreign Export Monitoring Act: Incorrect, FEMA covers overall foreign exchange management, not just exports.

Correct Answer: B. Tax Deducted at Source

• **Tax Deducted at Source** = It is a method of collecting income tax by deducting it at the very point of income generation. • **Steady stream of revenue** — TDS ensures a consistent flow of tax revenue for the government throughout the year. • 💡 Wrong-option analysis: Tax Debit System: Incorrect, this is not the recognized term for this tax collection method; Transaction Data Summary: Incorrect, this refers to a record of transactions, not a tax deduction system; Total Deposit Scheme: Incorrect, this refers to a savings or investment plan, not a tax mechanism.

Correct Answer: B. National Bank for Agriculture and Rural Development

• **National Bank for Agriculture and Rural Development** = It is the apex development bank in India providing credit and other facilities for the promotion and development of agriculture and rural areas. • **July 12, 1982** — NABARD was established on this date following the recommendations of the Shivaraman Committee. • 💡 Wrong-option analysis: National Association for Business and Regional Development: Incorrect, this is not the full form of NABARD; Native Agency for Banking and Rural Distribution: Incorrect, this is not the full form of NABARD; New Asian Bank for Agricultural Reform and Design: Incorrect, this is not the full form of NABARD.

Correct Answer: A. Micro, Small and Medium Enterprises

• **Micro, Small and Medium Enterprises** = MSME is an acronym for Micro, Small and Medium Enterprises, crucial for economic growth and employment. • **Economic backbone** — These enterprises are the backbone of many economies, contributing significantly to employment and exports. • 💡 Wrong-option analysis: [Option B]: Incorrect; 'MSME' is about enterprise size, not a monitoring entity; [Option C]: Incorrect; 'M' stands for Micro, not Major or Mini; [Option D]: Incorrect; 'MSME' refers to business classification, not a management discipline.

Correct Answer: D. Balance of Payments

• **Balance of Payments** = BOP is a record of all economic transactions between a country's residents and the rest of the world. • **Economic stability** — A balanced BOP indicates economic stability in a country's external dealings, covering goods, services, and capital. • 💡 Wrong-option analysis: [Option A]: Incorrect; 'BOP' does not stand for Bureau of Prices; [Option B]: Incorrect; 'BOP' is not Bank of Profits; [Option C]: Incorrect; 'BOP' does not represent Base of Production.

Correct Answer: A. Small Industries Development Bank of India

• **Small Industries Development Bank of India** = SIDBI is a development financial institution focused on promoting micro, small, and medium-scale industries. • **1990** — SIDBI was established in 1990 as a subsidiary of IDBI to support the growth and development of MSMEs. • 💡 Wrong-option analysis: [Option B]: Incorrect; SIDBI focuses on industrial development, not just digital banking information; [Option C]: Incorrect; SIDBI's primary focus is on small industries, not general social infrastructure; [Option D]: Incorrect; SIDBI is a development bank for small industries, not a standard investment bank.

Correct Answer: D. Repurchase Option

• **Repurchase Option** = REPO, or Repurchase Agreement, is the rate at which the central bank lends money to commercial banks. • **Monetary policy tool** — It is a key tool used by the central bank to control inflation and liquidity in the economy. • 💡 Wrong-option analysis: [Option A]: Incorrect; 'REPO' does not stand for Registration Order; [Option B]: Incorrect; 'REPO' is not Revenue Portfolio; [Option C]: Incorrect; 'REPO' does not represent Reserve Policy.

Correct Answer: A. Securities Transaction Tax

• **Securities Transaction Tax** = STT is a direct tax levied on the purchase or sale of securities listed on stock exchanges. • **2004** — STT was introduced in 2004 to reduce tax evasion on capital gains from securities transactions. • 💡 Wrong-option analysis: [Option B]: Incorrect; 'STT' does not stand for Super Transaction Toll; [Option C]: Incorrect; 'STT' is not Standard Tariff Tax; [Option D]: Incorrect; 'STT' specifically relates to securities transactions, not a general State Sales Tax.