Public FinancePYQ - Nov 2020 (Inter)Question 138 of 20
All Questions

Fiscal Federalism refers to:

Options

AFederal Government only
BFinancial relations between Central and State
CBanking system
DInternational trade
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Correct Answer

✅ Option b — Financial relations between Central and State

All Options:

  • AFederal Government only
  • BFinancial relations between Central and State
  • CBanking system
  • DInternational trade

Detailed Solution & Explanation

To understand Fiscal Federalism, let's break it down into steps: • Fiscal Federalism is a concept that deals with the distribution of financial resources and powers between different levels of government. • It involves the financial relationships and interactions between the central government and state or provincial governments. • This concept is crucial in a federal system of government, where power is divided between the central authority and constituent units. The correct answer is right because Fiscal Federalism specifically refers to the financial ties and responsibilities shared between central and state governments, which is a key aspect of federal governance. On the other hand, options like Federal Government only and International trade are incorrect because they either focus on a single level of government or a completely different economic concept, respectively. For instance, Federal Government only is incorrect because Fiscal Federalism involves multiple levels of government, not just the central authority.

About This Chapter: Public Finance

Paper

Paper 4: Business Economics

Weightage

10%

Key Topics

Fiscal Policy, Budget, Market Failure

This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.

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