The term 'Fiscal Drag' refers to: MCQ with Answer and Explanation

The term 'Fiscal Drag' refers to:
A. Deliberate reduction in government spending
B. Increase in fiscal deficit
C. Decrease in tax rates
D. Automatic increase in tax revenue due to inflation
Answer: Option D
Solution (By JKSSB Mock Tests)
Fiscal drag occurs when inflation pushes taxpayers into higher tax brackets, increasing tax revenue without any change in tax rates, acting as an automatic stabiliser.

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Practice More Economy Set 1 Questions

Question #1
Which of the following is a major source of revenue for the Central Government of India?
A. Corporation tax, income tax and GST (central share)
B. Only professional tax
C. Only state GST
D. Only property tax

Correct Answer: Option A


Explanation:
Major sources of central government revenue include corporation tax, personal income tax, and the central share of GST, along with customs and other duties.

This question belongs to: Economy GK Economy Set 1
Question #2
In the context of competition policy for digital markets, 'Killer Acquisitions' refer to:
A. Only horizontal mergers among equals
B. Acquisitions of innovative start-ups by dominant incumbents with the aim of discontinuing the target’s innovation to protect the incumbent’s market position
C. Only conglomerate mergers without any competitive effect
D. Acquisitions that always increase innovation

Correct Answer: Option B


Explanation:
Killer acquisitions occur when a dominant firm acquires a potential competitor primarily to eliminate the competitive threat posed by the target’s product or technology rather than to develop it.

This question belongs to: Economy GK Economy Set 1
Question #3
Certificate of deposit is issued by:
A. RBI only
B. mutual funds
C. stock exchanges
D. banks and financial institutions

Correct Answer: Option D


Explanation:
Certificates of deposit are issued by banks and financial institutions.

This question belongs to: Economy GK Economy Set 1