NCERT Solutions Class 12 Economics Government Budget and the Economy. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises
Government Budget and the Economy
Question 1. Explain why public goods must be provided by the government? [3-4 Marks]
Answer: 1. Public goods are those goods and services for which consumption by some individuals does not reduce the amount available to others.
2. For example parks, roads, water, bridges, national defence etc..
3. These goods are non-rival and non-excludable ones.
4. People receives benefits from public goods but do not pay for them. Such a goods can only prepared by government.
Question 2. Distinguish between revenue expenditure and capital expenditure . State the basis of classifying government expenditure into revenue and capital expenditure. Give an example of each.
Question 3. The fiscal deficit gives the borrowing requirement of the government Elucidate. [3-4 Marks]
Answer:1. Fiscal deficit is defined as excess of total expenditure over total receipts (revenue and capital receipts) excluding borrowing. In the form of an equation:
Fiscal Deficit = Total Budget Expenditure – Total Budget Receipts (Net of borrowing) = Total Expenditure (Revenue
Expenditure + Capital Expenditure) – Revenue Receipts (Tax Revenue + Non-Tax Revenue) – Non-Debt Capital Receipts (Recovery of Loans + Dis-investment Proceeds)
= Revenue Deficit + Capital Deficit (excluding Borrowing)- Borrowing
= Net borrowing at home + Borrowing from RBI + Borrowing from abroad
2. Fiscal deficit shows total borrowing requirements of the government from all sources.
3. As the government borrowing increases, its liability in future to repay loan with interest also increases leading to a higher revenue deficit. Therefore, fiscal deficit should be as low as possible.
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