Chapter-4 Government Budget and the Economy — Online MCQ Test
ECONOMICS · Grade 12 · CBSE(NCERT)
Practice Chapter-4 Government Budget and the Economy with a free chapter-wise online MCQ test.
This chapter covers: government budget - revenue receipts - capital receipts - revenue expenditure - capital expenditure - revenue deficit - fiscal deficit - primary deficit.
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Chapter-4 Government Budget and the Economy — Important Questions & Answers
What is a government budget?
- A. An annual statement of estimated revenues and expenditures
- B. A record of past government spending only
- C. A list of all government employees
- D. A plan for private sector investment
Answer: A. An annual statement of estimated revenues and expenditures
A government budget is the annual financial statement that outlines estimated revenues and expenditures for a fiscal year.
A government budget is the annual financial statement that outlines estimated revenues and expenditures for a fiscal year.
Revenue receipts include which of the following?
- A. Loans and borrowings
- B. Sale of government assets
- C. Taxes and non-tax revenues
- D. Disinvestment
Answer: C. Taxes and non-tax revenues
Revenue receipts are non-debt creating receipts that include taxes and non-tax revenues like fees and penalties.
Revenue receipts are non-debt creating receipts that include taxes and non-tax revenues like fees and penalties.
Which of the following is NOT a revenue receipt?
- A. Income tax
- B. Excise duty
- C. Borrowing from the public
- D. License fees
Answer: C. Borrowing from the public
Borrowing is a capital receipt as it creates a liability for the government, whereas income tax, excise duty, and license fees are revenue receipts.
Borrowing is a capital receipt as it creates a liability for the government, whereas income tax, excise duty, and license fees are revenue receipts.
Why is a growing primary deficit concerning for an economy?
- A. It indicates the government is spending more on interest payments
- B. It shows the government's current expenditure (excluding interest) exceeds its current revenues
- C. It always leads to inflation
- D. It reduces the fiscal deficit automatically
Answer: B. It shows the government's current expenditure (excluding interest) exceeds its current revenues
A growing primary deficit indicates structural fiscal imbalance where government's operational spending exceeds revenues, which may require unsustainable borrowing.
A growing primary deficit indicates structural fiscal imbalance where government's operational spending exceeds revenues, which may require unsustainable borrowing.
Scenario: Country A has a fiscal deficit of Rs. 5 lakh crore with interest payments of Rs. 3 lakh crore. Country B has a fiscal deficit of Rs. 3 lakh crore with interest payments of Rs. 1 lakh crore. Which country faces greater fiscal stress?
- A. Country A, because its fiscal deficit is larger
- B. Country B, because its primary deficit is larger
- C. Country A, because interest burden is higher
- D. Both face equal stress
Answer: C. Country A, because interest burden is higher
Country A's primary deficit is Rs. 2 lakh crore (5-3), while Country B's is Rs. 2 lakh crore (3-1). However, Country A's higher absolute interest burden (Rs. 3 lakh crore) indicates greater debt stress and fiscal vulnerability.
Country A's primary deficit is Rs. 2 lakh crore (5-3), while Country B's is Rs. 2 lakh crore (3-1). However, Country A's higher absolute interest burden (Rs. 3 lakh crore) indicates greater debt stress and fiscal vulnerability.