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

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

Question: A tax, the burden of which can be shifted to others, is called:
a) Indirect tax
b) Direct tax
c) Wealth tax
d) None of these

Answer: a

Question: Progressive tax is a tax which is:
a) Charged at a decreasing rate when income of the individual increases
b) Charged at an increasing rate when income of the individual increases
c) A fixed percentage of an individual income
d) None of these

Answer: b

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

Question: Regressive tax is a tax which is:
a) Charged at an increasing rate when income of the individual increases
b) Charged at a decreasing rate when income of the individual increases
c) Relatively a low percentage of an individual’s income
d) None of these

Answer: b

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

Question: Which of the following is/are implication/s of fiscal deficit?
a) Erosion of government credibility
b) Inflationary spiral
c) National debts for future generation
d) None of these

Answer: d

Question: Taxes like wealth and gift tax in India which carry their significance in terms of revenue yield are called:
a) Indirect tax
b) Direct tax
c) Value added tax
d) Paper taxes

Answer: d

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

Answer: a

Question: Which of the following is an indirect tax?
a) Wealth tax
b) Excise tax
c) Income tax
d) None of these

Answer: b

Question: Tax 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 these

Answer: c

Question: In the context of government budget, which of the following statements is correct?
a) Budget is a statement of expected annual receipts and expenditures of the government
b) It is the detail of actual receipts and expenditures of the government in a financial year
c) It offers a detailed description of achievements of the government during the five-year plans
d) It indicates BoP status of the domestic economy

Answer: a

Question: Which of the following are the objectives of government budget?
a) Redistribution of income and wealth
b) Economic stability
c) GDP growth
d) All of these

Answer: d

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 these

Answer: a

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 these

Answer: b

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 these

Answer: b

Question: Which of the following is a non-tax receipt?
a) Fees
b) Fines
c) Gift tax
d) Grants and donations

Answer: c

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

Question: Which one is the reason for appearing Deficit Demand condition?
a) Fall in the money supply in the country
b) Fall in investment demand as a result of rising bank rate
c) Fall in disposable income and consumer demand due to increase in taxes
d) All of the above

Answer: d

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 these

Answer: d

Question: Street light is an example of __ good.
a) Private
b) Government
c) Public
d) None of these

Answer: c

Question: Dis-investment by the government refers to
a) Selling of fixed capital assets by government
b) Selling of plants of government
c) Selling of share of PSUs
d) Selling of buildings and shares of government

Answer: c

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

Answer: d

Question: Which of the following is not an objective of the government budget?
a) Reducing inequality of income and wealth
b) Full employment
c) Economic growth
d) Reallocation of resources

Answer: b

Question: The 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: a

Question: ______ is not an example of non-tax revenue from below:
a) Excise duty
b) Penalties
c) Fees
d) Both (a) and (b)

Answer: a

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

Answer: d

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

Question: The budget may include:
a) Revenue Deficit
b) Fiscal Deficit
c) Primary Deficit
d) All of these

Answer: d

Question: As an agreement with WHO conventions, India distributed free COVID-19 vaccines to many third-world countries. Which of the following type of expenditure is this?
a) Revenue expenditure
b) Capital Expenditure
c) Both (a) and (b)
d) Neither (a) nor (b)

Answer: a

Question: Interest payments, defense services expenditure, subsidies, salaries, and pensions are the main items of __ of the government. (plan expenditure/non-plan expenditure)
a) Revenue expenditure
b) Capital expenditure
c) Plan expenditure
d) Non-Plan expenditure

Answer: a, d

Question: Which of the following is a non-tax receipt?
a) Gift tax
b) Sales tax
c) Donations
d) Excise duty

Answer: c

Question: Choose the correct statement given below about demonetization announced on 8th November, 2016.
a) Government removed the legal tender status of the existing currency notes.
b) Central government made existing currency notes a limited legal tender.
c) It reduced the purchasing power of existing currency notes
d) All of the above

Answer: d

Question: Financial Year in India is:
a) April 1 to March 31
b) January 1 to December 31
c) October 1 to September 30
d) None of the above

Answer: a

Question: Which is a revenue receipt of the government?
a) Funds raised by the government by issuing National Saving Certificates
b) Sale of 40% shares of a public sector undertaking to private enterprises
c) Amount borrowed from Japan for construction of Bullet Train
d) Profits of LIC, a public enterprise

Answer: d

Question: Which of the following is not a revenue receipt?
a) Recovery of Loans
b) Foreign Grants
c) Profits of Public Enterprise
d) Wealth Tax

Answer: a

Question: Which of the following is not a characteristic of public goods?
a) The consumption of public goods by several individuals is rivalrous.
b) It is difficult and sometimes impossible to collect fees for the public goods.
c) Public goods are non-excludable
d) None of the above

Answer: a

Question: The government budget has a revenue deficit. This gets financed by:
a) Borrowing
b) Disinvestment
c) Tax Revenue
d) Indirect taxes
Options:
(a) A and D
(b) C and D
(c) A and B
(d) C and B

Answer: a

Question: Assertion (a): The construction of flyovers is a revenue expenditure of the government.
Reason (R): Capital expenditure leads to the creation of physical assets of the government.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion((a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion((a) is False but Reason (R) is true.

Answer: d

Question: Assertion (a): Profits of public sector undertakings is revenue receipt.
Reason (R): Revenue Receipts are regular and recurring in nature.
Alternatives:
(a) Both Assertion ((a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion ((a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Answer: a

Fill in the blanks:

Question. A deficit budget is that in which total expenditure is ________ total receipts.
Answer: greater than

Question. Revenue deficit is that in which revenue receipts are ________ revenue expenditure.
Answer: less than

Question. _______ tax is that in which the final burden of the tax fall on the person who pays it.
Answer: Direct

Question. Tax is a legally compulsory payment imposed by the _______ on income and property of persons and companies.
Answer: Government

Question. Recovery of loan is treated as capital receipt because it leads to __________
Answer: reduction of assets

Question. Primary Deficit = Fiscal Deficit minus __________
Answer: Interest on Debt

Question. ________ are levied on goods and services.
Answer: Indirect taxes

Question. _________ does not have any impact on the asset-liability status of the government.
Answer: Revenue budget

Question. The government can influence the allocation of resources through the implementation of appropriate _________
Answer: fiscal policy

Question. __________ is a document containing income and expenditure of the government.
Answer: Budget

Question. Income tax is _________ tax.
Answer: Direct

Question. _________ tax is levied on the value of the goods.
Answer: Advalorem

Question. Service tax is levied by the ________
Answer: Central

Question. _________ budget is considered good for the country.
Answer: Deficit

Question. Finance bill contains _________ proposals.
Answer: Tax

Question. Government budget is presented on the last day of _________
Answer: February

State true or false :

Question. Public goods are collectively consumed.
Answer: True

Question. There is a feasible way of excluding anyone from enjoying the benefits of public goods.
Answer: False

Question. The three functions of allocation, redistribution, and stabilization are operated through the expenditure and receipts of the government.
Answer: True

Question. The deficit decreases in a recession and increases in a boom, even without any change in fiscal policy.
Answer: False

Question. Indirect taxes are not convenient to realise.
Answer: False

Question. Payment of salaries to the government employees is a capital payment.
Answer: False

Question. Expenditure made on the establishment of the metro rail line in Delhi is a capital expenditure.
Answer: True

Question. Public borrowing is a capital receipt.
Answer: True

Question. Recovery of loan is a revenue receipt.
Answer: False

Question. Service tax is a direct tax.
Answer: False

Question. Grants by the government are treated as revenue expenditure.
Answer: True

Question. Excess of capital expenditure over capital receipt is called revenue deficit.
Answer: False

Question. A deficit budget is not considered a good budget.
Answer: False

Question. Electricity tax is levied by the State Government.
Answer: True

Question. The budget speech is given by the Finance Minister.
Answer: True

Question. Central excise duty is a direct tax.
Answer: False

Question. The interest payment is a planned item.
Answer: False

Question. During deflation surplus budget is made.
Answer: True

Question. The rail budget is generally not included in the annual budget.
Answer: True

Match the following

Question. Match the following:
‘A’
1. Income and expenditure of the government
2. First of all finance bill is presented in the
3. Budget is presented on
4. Aim or Objective of the budget
5. Main feature of the budget

‘B’
(a) 31 March
(b) Budget
(c) Details about income and expenditure
(d) Loksabha
(e) Economic development.

Answer:
1. Income and expenditure of the government - (b) Budget
2. First of all finance bill is presented in the - (d) Loksabha
3. Budget is presented on - (a) 31 March
4. Aim or Objective of the budget - (e) Economic development.
5. Main feature of the budget - (c) Details about income and expenditure

Question. Match the following:
Column-I
1. Surplus budget
2. Deficit budget
3. Revenue deficit
4. Fiscal deficit
5. Primary deficit
6. Examples of direct tax
7. Examples of indirect tax
8. Examples of development expenditure
9. Examples of non-development expenditure
10. Examples of capital expenditure
11. Sources of tax revenue

Column-II
(A) Revenue receipts \( > \) Revenue expenditure
(B) Fiscal deficit – interest payments
(C) Govt. Expenditure \( < \) Govt. Receipts
(D) Income tax, corporate profit tax
(E) Expenditure on roads and health
(F) Govt. Expenditure \( > \) Govt. Receipts
(G) Loans granted to state governments
(H) Total expenditure \( > \) total receipts
(I) Sale tax, excise duty
(J) Sales tax, Income tax
(K) Expenditure on administration and defence

Answer:
1. Surplus budget - (C) Govt. Expenditure \( < \) Govt. Receipts
2. Deficit budget - (F) Govt. Expenditure \( > \) Govt. Receipts
3. Revenue deficit - (A) Revenue receipts \( > \) Revenue expenditure
4. Fiscal deficit - (H) Total expenditure \( > \) total receipts
5. Primary deficit - (B) Fiscal deficit – interest payments
6. Examples of direct tax - (D) Income tax, corporate profit tax
7. Examples of indirect tax - (I) Sale tax, excise duty
8. Examples of development expenditure - (E) Expenditure on roads and health
9. Examples of non-development expenditure - (K) Expenditure on administration and defence
10. Examples of capital expenditure - (G) Loans granted to state governments
11. Sources of tax revenue - (J) Sales tax, Income tax