GOVERNMENT BUDGET AND THE ECONOMY

(6 MARKS)
Multiple Choice Questions
1. An annual statement of the estimated receipts and expenditure of the government
over the fiscal year is known as:
(a) Income
(b) Budget
(c) Account
(d) Expenditure

2. The duration of fiscal year is:

(a) 1st Jan.- 31st Dec.
(b) 1st Jan.- 31st March.
(c) 1stApril.- 31st Dec.
(d) 1st April.- 31st March

3. Budget is prepared for-

(a) One Year
(b) Two years
(c) Three Years
(d) Five Years

4. Who presents budget in the parliament?

(a) President
(b) Prime Minister
(c) Finance Minister
(d) Home Minister

5. Which of these is not an objective of govt. budget?

(a) Reallocation of resources
(b) Redistribution of income& wealth
(c) Poverty removal
(d) Economic Stability

6. Which of these is an objective of govt. budget?

(a) Economic Stability
(b) Reallocation of resources
(c) Management of PSUs
(d) All of these

7. The main aim of managing public enterprises is:

(a) Earning profit
(b) Expanding public sector
(c) Control over private sector
(d) Promotion of public welfare

8. Which of these is a component of govt. budget?

(a) Budget receipts
(b) Budget expenditure
(c) Both a & b
(d) None

9. How many types of revenue receipt are there?

(a) 2
(b) 3
(c) 4
(d) 5

10. Which of the following statement is true about revenue receipts?

(a) These create liability
(b) These reduce assets
(c) These neither create liability nor reduce assets
(d) These create assets

11. Identify non revenue receipt:

(a) Income tax
(b) Fee
(c) Fine
(d) Penalty

12. An example of tax revenue is:

(a) Income tax
(b) GST
(c) Corporate tax
(d) All of these

13. Union budget is the budget of:

(a) Central govt.
(b) State govt.
(c) Local govt.
(d) Election Commission

14. Which of the following statements is true?

(a) Loans from IMF is a revenue receipt
(b) Higher revenue deficit necessarily leads to higher fiscal deficit
(c) Borrowing by a govt. represents a situation of fiscal deficit.
(d) Revenue deficit is the excess of capital receipts over the revenue receipts.

15. Borrowings are equivalent to:

(a) Revenue deficit
(b) Primary deficit
(c) Fiscal deficit
(d) None of these

16. Capital receipts include:

(a) Tax revenue
(b) Non-tax revenue
(c) Grants from World bank
(d) Borrowings
17. Borrowing is a capital receipt because:
(a) It creates a liability
(b) It creates an asset
(c) It reduces a liability
(d) All of the above

18. Escheat is an example of :

(a) Capital receipts
(b) Revenue receipts
(c) Capital expenditure
(d) Revenue expenditure

19. Interest income is a part of :

(a) Non-tax revenue
(b) Revenue receipts
(c) Both a and b
(d) None of these.

20. Budget expenditure includes:

(a) Capital expenditure
(b) Revenue expenditure
(c) Both a and b
(d) None of these

21. Which of these is an example of revenue expenditure:

(a) Payment of salaries
(b) Pension
(c) Interest payment
(d) All of these

22. The grants to states by the union govt. is kept under

(a) Revenue receipts
(b) Revenue expenditure
(c) Capital receipts
(d) Capital expenditure

23. Identify the revenue expenditure

(a) Construction of metro
(b) Repayment of loan
(c) Purchase of machinery
(d) Expenditure on defense services

24. Capital expenditure is that estimated expenditure of the govt. by which:

(a) Assets are increased
(b) Liability is decreased
(c) Both a and b
(d) Assets and liabilities do not change

25. The incidence of tax refers to:

(a) Level and rate of taxation
(b) Who ultimately bears the money burden of the tax
(c) Growth of taxation
(d) Way in which a tax is collected

26. Disinvestment by govt. means:

(a) Selling of its fixed capital assets
(b) Selling of shares of public enterprises held by it
(c) Selling of its buildings
(d) All of the above.

27. ________________ reduces assets of the government.

(a) Recovery of loan
(b) Disinvestment
(c) Both a and b
(d) None of these

28. The difference between fiscal deficit and interest payment is called
(a) Revenue deficit
(b) Primary deficit
(c) Budget deficit
(d) Capital deficit

29. If primary deficit is rupees 6900 and interest payment is rupees 600, then fiscal
deficit is:
(a) Rupees 6300
(b) Rupees 7500
(c) Rupees 7400
(d) Rupees 7300

30. Budget deficit means:

(a) Total expenditure – total receipts
(b) Capital expenditure – capital receipts
(c) Total expenditure – C receipts
(d) Total expenditure – revenue receipts

31. Borrowing in govt. budget is:

(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes

32. Primary deficit in a govt. budget is:

(a) Revenue expenditure – revenue receipts
(b) Total expenditure – total receipts
(c) Revenue deficit – interest payments
(d) Fiscal deficit – interest payments

33. If the total receipts are Rs.3000 crores and total expenditure is Rs. 4200 crores then
budgetray deficit will be:
(a) Rs.1200 Crores
 (b) Rs. 3000 Crores
(c) Rs. 7200 Crores
(d) Rs. 500 Crores

34. A government budget shows a primary deficit of Rs. 4400 crores. The interest
payment liability is Rs. 400 crores. How much is the fiscal deficit?
(a) Rs. 4000 Crores
(b) Rs. 4400 Crores
(c) Rs. 4800 Crores
(d) Rs. 5000 Crores

35. Zero primay deficit means:

(a) Fiscal deficit= Primay deficit
(b) Fiscal deficit= Interest payment
(c) Fiscal deficit> Interest payment
(d) Fiscal deficit< Interest payment

36. Which of the following budget is suitable for developing economies?

(a) Deficit budget
(b) Balanced budget
(c) Surplus budget
(d) None of these

37. Which one of the following is a pair of direct tax

(a) Excise duty & Wealth Tax
(b) Service Tax & Income Tax
(c) Excise duty & Service Tax
(d) Wealth Tax & IncomeTax

38. Which budgetary instruments are used by the govt. to reduce inequalities in income
and wealth?
(a) Tax & subsidy
(b) Tax & fine
(c) Fee & fine
(d) None of these

39. “Policies of surplus budget during inflation” is a part of which objective of govt.budget?
(a) Economic growth
(b) Economic stability
(c) Reducing regional disparities
(d) Reallocation of resources

40. Which of the following statements is false

(a) GST is an indirect tax
(b) Repayment of loan is a capital expenditure
(c) Capital expenditure reduces capital stock
(d) Capital expenditure adds to capital stock
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct
alternatives given below: (Q. No. 41- 50)

41. Assertion (A): Income tax is a direct tax.

Reason (R): Impact and incidence of direct tax is on the same individual.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

42. Assertion (A): Govt. earns profit through PSUs.

Reason (R): Non – tax revenue refers to receipts of the govt. from all sources other than those of tax
receipts

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

43. Assertion (A):A large Fiscal deficit leads to burden on future generation.
Reason (R): Interest payments and repayment of loans taken today would have to
be paid in future.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

44. Assertion (A): Receipt of fees by the govt. is a revenue receipt.

Reason (R):Revenue receipts reduce assets of the govt.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

45. Assertion (A): An increase in the govt. spending increases the tax burden on citizens.
Reason (R):Taxes finance govt. spending.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

46. Assertion (A): Recovery of loans is an example of capital receipts.

Reason (R): Capital receipts are the source of income of the govt.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

47. Assertion (A):The govt. affects the personal disposable income of households by making
transfers and collective taxes.
Reason (R): ): The govt. can reduce inequalities in income and wealth through its budgetary policy.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

48. Assertion (A):Old age pension is an example of capital expenditure.

Reason (R): Capital expenditure either creates assets or reduces liability of the
govt.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

49. Assertion (A): Tax payments to the govt. do not provide any direct benefit to the tax payer.
Reason (R): Govt. spends tax receipts for common benefit of the society. Tax payercannot expect
that the tax amount will be used for his direct benefit.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

50. Assertion (A):A low primary deficit forces the govt. to borrow.
Reason (R):Primary deficit is the difference between fiscal deficit and interest payments.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false
(d) (A) is false but (R) is true.

Read the report(Case Study-1) given below and answer the questions follow (Q.No. 51-55):

“In Financial year 2021-22, the government’s capital expenditure is estimated at Rs. 5.54 lakh crore
(annual increase of 29%) and the revenue expenditure is estimated to be Rs. 29.29 lakh crore(annual
increase of 12%). So, what are capital and revenue expenditure? Expenses which effect a change to
the assets of the government like recovery of loans are called capital expenditure. All other expenses
like payment of salaries are termed as revenue expenditure. The central govt. is targeting expenditure
of Rs.5.54 lakh crore which means more economic activities which means more jobs can get created
which can fuel consumption and demand thereby helping the economy grow.”

51. What is the budget expenditure of the govt. during 2021-22?

(a) Rs. 5.54 lakh crore
(b) Rs. 34.83 lakh crore
(c) Rs. 29.29 lakh crore
(d) Rs. 23.75 lakh crore

52. Which of these effects assets of the govt.?

(a) Revenue Expenditure
(b) Capital Expenditure
(c) Both a& b
(d) None of these

53. More capital expenditure means:

(a) More jobs
(b) More consumption demand
(c) More growth
(d) All of these

54. ______________ expenditure is recurring in nature.

(a) Revenue
(b) Capital
(c) Budget
(d) Non- planned

55. Which of these an asset of the government?

(a) Lenders
(b) Borrowers
(c) Pensioners
(d) All of these

Read the report (Case Study-2) given below and answer the questions (Q.No. 56-60) follow:

“Mr. Sunil Kumar Sinha, Principal economist at India Rating and research- which expects financial
year 2020-21 fiscal deficit at 7% of GDP. The expenditure pattern suggests that expansion in fiscal
deficit is not due to increased expenditure which has been muted so far. The higher fiscal deficit is
primarily originating from lower receipts.Corporation tax collections were Rs. 1.03 lakh crore lower
year-on-year and income tax collections were down Rs. 33 crore. Non-tax revenue has also been
lower so far at just 32% budget amount.”

56. The duration of financial year 2020-21 was:

(a) 1st Jan 2020.- 31st Dec.2020
(b) 1st Jan.2020- 31st March.2021
(c) 1st April.2020- 31st Dec.2020
(d) 1st April.2020- 31st March 2021

57. Higher fiscal deficit means:

(a) Higher GDP
(b) Higher lending
(c) Higher borrowings
(d) Lower borrowings
58. Corporation tax is an example of:
(a) Revenue receipt
(b) Capital receipt
(c) Revenue expenditure
(d) Capital expenditure

59. Which of these an example of Non-tax revenue?

(a) Income tax
(b) Wealth tax
(c) Property tax
(d) Escheat

60. Budget deficit means:

(a) Budget Expenditure = Budget receipts
(b) Budget Expenditure < Budget receipts
(c) Budget Expenditure > Budget receipts
(d) Budget Expenditure> = Budget receipts