CBSE Class 12 Economics Government Budget and The Economy MCQs Set 04

Question. The total indirect tax collected by the government is Rs. 500 crores while the total subsidy provided by the government on various programs costs Rs. 300 crores to the government. Identify the value of Net Indirect Tax of the economy.
(a) Rs. 800 crores
(b) (–) Rs. 200 crores
(c) Rs. 200 crores
(d) (–) Rs. 800 crores
Answer: (c) Rs. 200 crores

Question. If in an economy the value of Net Indirect Taxes is Rs. 50 crores and the value of subsidies is Rs. 40 crores. Identify the value of Net Indirect Tax.
(a) Rs. 90 crores
(b) Rs. 80 crores
(c) Rs. 10 crores
(d) Rs. 50 crores
Answer: (c) Rs. 10 crores

Question. What is the value of consumption of fixed capital if Net investment is equal to 500 crores and Gross investment is equal to 535 crores.
(a) Rs. 35 crores
(b) Rs. 1035 crores
(c) (–) Rs. 35 crores
(d) Rs. 60 crores
Answer: (a) Rs. 35 crores

Question. Primary deficit in a government budget will be zero, when..................
(a) Revenue deficit is zero
(b) Net interest payments are zero
(c) Fiscal deficit is zero
(d) Fiscal deficit is equal to interest payment.
Answer: (d) Fiscal deficit is equal to interest payment.

Question. When the rate of tax increases with the increase in income of the people, we call that tax as
(a) Proportional Tax
(b) Regressive Tax
(c) Budgetary Tax
(d) Progressive Tax
Answer: (d) Progressive Tax

Question. The non-tax revenue in the following is:
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise
Answer: (c) Dividends

Question. Revenue expenditure is Rs. 40,000 crores, revenue receipts are Rs. 34,000 crores and borrowings are Rs. 5000 crores; what will be the fiscal deficit?
(a) Rs. 6000 crores
(b) Rs. 40,000 crores
(c) Rs. 11,000 crores
(d) Rs. 5000 crores
Answer: (d) Rs. 5000 crores

Question. Which of the following is NOT a non-tax source of revenue for the government?
(a) Interest received
(b) Fees
(c) Fines
(d) GST
Answer: (d) GST

Question. The difference between fiscal deficit and interest payments is known as:
(a) Primary deficit
(b) Revenue deficit
(c) Budget deficit
(d) Borrowing deficit
Answer: (a) Primary deficit

Question. Primary deficit equals:
(a) Borrowings
(b) Interest payments
(c) Borrowings less interest payments
(d) Borrowings and interest payments both
Answer: (c) Borrowings less interest payments

Question. Which tax is recently (in July, 2017) introduced by the government with the objective “One nation, one tax and one market”?
(a) VAT
(b) Sales Tax
(c) Corporation Tax
(d) GST
Answer: (d) GST

Question. Direct tax is called direct because it is collected directly from:
(a) The producers on goods produced
(b) The sellers on goods sold
(c) The buyers of goods
(d) The income earners
Answer: (d) The income earners

Question. Primary deficit in a government budget is:
(a) Revenvue expenditure – Revenvue receipts
(b) Total expenditure – Total receipts
(c) Revenvue dificit – Revenvue payments
(d) Fiscal deficit – Interest payments
Answer: (d) Fiscal deficit – Interest payments

Question. Borrowing in government budget is:
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes
Answer: (b) Fiscal deficit

Question. The non-tax revenue in the following is:
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise
Answer: (c) Dividends

Question. Fiscal deficit equals :
(a) Interest Payments
(b) Borrowings
(c) Interest payments less borrowing
(d) Borrowings less interest payments
Answer: (b) Borrowings

Question. Receipts which do not affect asset or liability status of the government
(a) capital receipts
(b) revenue receipts
(c) budgetary receipts
(d) None of the options
Answer: (b) revenue receipts

Question. Example of a non-debt creating capital receipt
(a) borrowings
(b) investment
(c) recovery of loans
(d) None of the options
Answer: (c) recovery of loans

Question. Amount of fiscal deficit is equal to………..
(a) disinvestment
(b) borrowings
(c) recovery of loans
(d) None of the options
Answer: (b) borrowings

Question. Which of the following is not a revenue receipt ?
(a) recovery of loans
(b) fees and fines
(c) collection of taxes
(d) foreign grants
Answer: (a) recovery of loans

Question. Which of the following deficits in government budget indicates the total borrowing requirements of the government:
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) None of the options
Answer: (b) Fiscal deficit

Question. Borrowing is a capital receipt because:
(a) It reduces liability
(b) It creates an asset
(c) It creates a liability
(d) It neither reduces nor creates a liability
Answer: (c) It creates a liability

Question. Fiscal deficit is estimated as:
(a) Total Expenditure (revenue + capital) − Total Receipts
(b) Total Expenditure (revenue + Borrowings) − Total Receipts
(c) Total Expenditure (Total receipts + capital) – revenue
(d) Total Expenditure (Borrowings + capital) − Total Receipts
Answer: (a) Total Expenditure (revenue + capital) − Total Receipts

Question. Tools of ........................ policy are government expenditure, taxes, public borrowing and borrowing from Central Bank.
(a) fiscal
(b) monetary
(c) both (a) and (b)
(d) exim
Answer: (a) fiscal

Question. Demand for ............... goods has gone significantly down during covid period.
(a) non-essential
(b) essential
(c) both (a) and (b)
(d) None of the options
Answer: (a) non-essential

Question. ....................... is a direct tax.
(a) Income tax
(b) Excise duty
(c) Sales tax
(d) Entertainment tax
Answer: (a) Income tax

Question. ................................ cannot be provided through the market mechanism.
(a) Private goods
(b) Public goods
(c) Luxury goods
(d) Necessary goods
Answer: (b) Public goods

Question. ............... investment includes replacement of existing assets whereas ............. investment does not.
(a) Gross, fixed
(b) Inventory, net
(c) Fixed, inventory
(d) Gross, net
Answer: (d) Gross, net

Question. The government can reduce revenue deficit ..................... .
(a) By reducing expenditure
(b) By increasing Taxes
(c) By increasing receipts from non-tax resources
(d) All of the options
Answer: (d) All of the options

Question. ................... is an example of direct tax.
(a) entertainment tax
(b) sales tax
(c) VAT
(d) income tax
Answer: (d) income tax

Question. Disinvestment is a .................. .
(a) capital expenditure
(b) capital receipts
(c) revenue expenditure
(d) revenue receipts
Answer: (b) capital receipts

Question. The policies useful to reduce inequalities of income are the .................. .
(a) monetary policies
(b) public distribution policies
(c) budgetary policies
(d) foreign policies
Answer: (c) budgetary policies

Question. The correct components of the union (central) budget of India are .................. .
(a) Revenue budget
(b) Capital budget
(c) Expenditure budget
(d) Both (a) and (b)
Answer: (d) Both (a) and (b)

Question. Net indirect taxes = Indirect taxes − .................. .
(a) Subsidies
(b) Reserve
(c) Depreciation
(d) None of the options
Answer: (a) Subsidies

Question. Primary deficit in a government budget will be zero, when .................. .
(a) Revenue deficit is zero
(b) Net interest payments are zero
(c) Net interest payments are zero
(d) Fiscal deficit is equal to interest payment.
Answer: (d) Fiscal deficit is equal to interest payment.

Question. Identify the correct pair of statements from the following column I and column II.
Column I | Column II
A Borrowings | (i) Capital receipts
B Fiscal year | (ii) 1 Jan. 31 Dec
C Direct tax | (iii) Burden can be shifted
D GST | (iv) Government sale tax
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (a) A-i

Question. Identify the correct pair of statements from the following column I and column II.
Column I | Column II
A Defence expenditure | (i) Wasteful expenditure
B Public provision | (ii) They are financed through the budget and made available free of any direct payment.
C Service tax | (iii) Direct tax
D Subsidies | (iv) Reduces welfare
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (b) B-ii

Question. Identify the correct pair from the column I and II.
Column I | Column II
A Credit side of Current Account | (i) Gift paid to foreigner
B Debit side of Current Account | (ii) Export of merchandise
C Credit side of Capital Account | (iii) Investment made in foreign
D Debit side of Capital Account | (iv) Loan given to the foreign nation
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (d) D-iv

Question. Identify the correct pair of statements from the following column I and column II.
Column I | Column II
A Progressive tax | (i) Rate of tax increases with an increase in income.
B VAT | (ii) Value at tax
C Specific tax | (iii) It is not levied on a commodity.
D Income tax | (iv) Capital receipts
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (a) A-i

Question. Identify the correct pair from the column I and II.
Column I | Column II
A Capital account | (i) Autonomous transactions
B Current account | (ii) Visible and Invisible goods
C Accomodating Items | (iii) Made for the purpose of profit.
D Borrowing from Abroad | (iv) Cannot be recorded in BoP.
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (b) B-ii

Question. Identify the correct pair of statements from the following column I and column II.
Column I | Column II
A Land registration fees | (i) Tax receipts
B Escheat | (ii) No claimant of the property
C Indian railways | (iii) Private enterprise
D Income tax | (iv) Capital expenditure
Alternatives:
(a) A-i
(b) B-ii
(c) C-iii
(d) D-iv
Answer: (b) B-ii