Chapter Exam

Chapter-4 Government Budget and the Economy — Online MCQ Test

Q: Revenue receipts include which of the following?

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.

Q: Which of the following is NOT a revenue receipt?

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.

Q: 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?

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.

ECONOMICS · Grade 12 · CBSE(NCERT)

Practice Chapter-4 Government Budget and the Economy with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ECONOMICS. This chapter covers: government budget - revenue receipts - capital receipts - revenue expenditure - capital expenditure - revenue deficit - fiscal deficit - primary deficit. AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter-4 Government Budget and the Economy — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ECONOMICS — Chapter-4 Government Budget and the Economy, with answers and explanations. These are sample questions; the exam has its own separate question set.

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.

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.

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.

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.

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.