CBSE Class 12 Economics HOTs Government Budget the Economy Set 02

1. Objective Type Questions (Remembering & Understanding based Questions)

A. Multiple Choice Questions

Choose the correct option:

Question. A tax, the burden of which can be shifted on to others, is called:
(a) indirect tax
(b) direct tax
(c) wealth tax
(d) None of the options
Answer: (a) indirect tax

Question. Tax, the impact of which lies on the person on whom it is legally imposed, is known as:
(a) indirect tax
(b) direct tax
(c) value added tax
(d) None of the options
Answer: (b) direct tax

Question. Which one of the following is an indirect tax?
(a) Wealth tax
(b) Excise duty
(c) Income tax
(d) None of the options
Answer: (b) Excise duty

Question. Which of the following is a direct tax?
(a) Income tax
(b) Excise duty
(c) Sales tax
(d) Custom duty
Answer: (a) Income tax

Question. Tax that is imposed on value added at the various stages of production is known as:
(a) corporate profit tax
(b) direct personal tax
(c) value added tax
(d) None of the options
Answer: (c) value added tax

Question. Gift tax is a paper tax because:
(a) it is an indirect tax
(b) it is a direct tax
(c) it does not have significant revenue yield
(d) both (b) and (c)
Answer: (c) it does not have significant revenue yield

Question. Which of the following is not a non-tax receipt?
(a) Fees
(b) Fines
(c) Gift tax
(d) Grants and donations
Answer: (c) Gift tax

Question. Which of the following is a part of the revenue expenditure in the Indian Government budget?
(a) Interest payments
(b) Defence purchases
(c) Wage bill of the government
(d) All of the options
Answer: (d) All of the options

Question. Capital receipt is that receipt of the government which:
(a) creates a liability
(b) reduces the assets
(c) both (a) and (b)
(d) neither (a) nor (b)
Answer: (c) both (a) and (b)

Question. Which of the following are capital receipts of the government?
(a) Recovery of loans
(b) Borrowings
(c) Disinvestment
(d) All of the options
Answer: (d) All of the options

Question. Capital expenditure is that estimated expenditure of the government by which:
(a) assets are increased
(b) liability is decreased
(c) both (a) and (b)
(d) assets and liabilities do not change
Answer: (c) both (a) and (b)

Question. Deficit budget refers to that situation in which government’s budget expenditure is:
(a) less than its budget receipts
(b) more than its budget receipts
(c) equal to its budget receipts
(d) None of the options
Answer: (b) more than its budget receipts

Question. Fiscal Deficit =
(a) Total expenditure – Total receipts other than borrowing
(b) Revenue expenditure – Revenue receipts
(c) Capital expenditure – Capital receipts
(d) Revenue expenditure + Capital expenditure – Revenue receipts
Answer: (a) Total expenditure – Total receipts other than borrowing

Question. In which of the following ways, can deficit in budget be financed?
(a) Borrowing from RBI
(b) Borrowing from the public
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: (c) Both (a) and (b)

Question. Which of the following is/are implication/s of fiscal deficit?
(a) Crowding-out
(b) Inflationary spiral
(c) Erosion of government credibility
(d) All of the options
Answer: (d) All of the options

Question. A budget is a balanced one when:
(a) Total expenditure = Total receipts
(b) Total expenditure < Total receipts
(c) Total expenditure > Total receipts
(d) None of the options
Answer: (a) Total expenditure = Total receipts

Question. Surplus budget is that budget wherein:
(a) Estimated revenue of the government < Estimated expenditure of the government
(b) Estimated revenue of the government > Estimated expenditure of the government
(c) Estimated revenue of the government = Estimated expenditure of the government
(d) None of the options
Answer: (b) Estimated revenue of the government > Estimated expenditure of the government

Question. The difference between fiscal deficit and interest payment is called:
(a) revenue deficit
(b) primary deficit
(c) budget deficit
(d) capital deficit
Answer: (b) primary deficit

Question. If primary deficit is Rs. 3,500 and interest payment is Rs. 500, then fiscal deficit is:
(a) Rs. 2,900
(b) Rs. 4,000
(c) Rs. 4,100
(d) Rs. 4,200
Answer: (b) Rs. 4,000

Question. The non-tax revenue in the following is: 
(a) export duty
(b) import duty
(c) dividends
(d) excise
Answer: (c) dividends

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

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 equals: 
(a) interest payments
(b) interest payments less borrowings
(c) borrowings less interest payments
(d) None of the options
Answer: (c) borrowings less interest payments

Question. Which one of these is a revenue expenditure?
(a) Purchase of shares
(b) Loans advanced
(c) Subsidies
(d) Expenditure on acquisition of land
Answer: (c) Subsidies

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

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. Disinvestment by government 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 options
Answer: (b) selling of shares of public enterprises held by it

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. Dividends received from Public Sector Undertakings (PSUs) are a part of the government’s _____. 
(a) non-tax revenue receipts
(b) tax receipts
(c) capital receipts
(d) capital expenditure
Answer: (a) non-tax revenue receipts

Question. Which of the following is a capital receipt in the government budget?
(a) Income tax
(b) Interest receipt
(c) Sale of shares of a Public Sector Undertaking (PSU) to X Limited (Private Company)
(d) Dividends from a Public Sector Undertaking (PSU)
Answer: (c) Sale of shares of a Public Sector Undertaking (PSU) to X Limited (Private Company)

B. Fill in the Blanks

Choose appropriate word and fill in the blank:

Question. The programmes and policies of the government as presented in the budget are known as _______ policy of the government. (fiscal/monetary)
Answer: fiscal

Question. On the _______ side, the budgetary policy reveals expected receipts of the government. (revenue/expenditure)
Answer: revenue

Question. _______ receipts do not create any corresponding liability for the government. (Revenue/Capital)
Answer: Revenue

Question. _______ is the excess of total expenditure over total receipts, other than borrowings. (Budget deficit/Fiscal deficit)
Answer: Fiscal deficit

Question. A tax is said to be _______ when it causes a greater real burden on the poor than the rich. (progressive/regressive)
Answer: regressive

Question. Fiscal discipline refers to the state of _______ between revenues and expenditures of the government. (balance/equilibrium)
Answer: balance

Question. Fiscal Deficit = _______ + Interest payment. (Revenue deficit/Primary deficit)
Answer: Primary deficit

Question. A _______ budget is that budget in which government receipts are equal to government expenditure. (balanced/unbalanced)
Answer: balanced

Question. Recovery of loan is a _______ receipt. (revenue/capital)
Answer: capital

Question. _______ expenditure creates assets for the government. (Revenue/Capital)
Answer: Capital