This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Economics Macro Economics > Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Capital expenditure increases the liabilities of the government. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 2. Which one of them is an Indirect tax A) Excise Duty. B) Fees. C) Corporation Tax. D) Special Assessment Tax. Show Answer Correct Answer: A) Excise Duty. 3. Disinvestment by government means A) Selling of fixed capital assets. B) Selling of shares of public enterprises held by it. C) Selling of its building. D) All of the above. Show Answer Correct Answer: B) Selling of shares of public enterprises held by it. 4. Which of the following is a characteristic of public goods? A) Non-rivalrous. B) Excludable. C) Rivalrous in nature. D) Provided only by private sector. Show Answer Correct Answer: A) Non-rivalrous. 5. What is the fiscal year considered in the context of the government budget? A) 1st April to 31st March. B) 1st July to 30th June. C) 1st October to 30th September. D) 1st January to 31st December. Show Answer Correct Answer: A) 1st April to 31st March. 6. Which type of expenditure is made in bridge construction? A) Capital exp. B) Revenue exp. C) Both a & b. D) None of the above. Show Answer Correct Answer: A) Capital exp. 7. If increase in income leads to reduction in tax rate, such types og tax system is know as ..... A) Regressive. B) Progressive. C) None of these. D) None of the above. Show Answer Correct Answer: A) Regressive. 8. Fill in the blank:The government also receives money by way of loans or from the sale of its assets. Loans will have to be returned to the agencies from which they have been borrowed. Thus they create ..... A) Profit. B) Liability. C) Asset. D) Revenue. Show Answer Correct Answer: B) Liability. 9. Which statement(s) is/are correct regarding revenue expenditure? A) They create liability. B) They reduce liability. C) They do not create assets. D) They create assets. Show Answer Correct Answer: C) They do not create assets. 10. Which of the following is the component of a budget? A) Fiscal budget. B) Capital budget. C) Both of these. D) None of these. Show Answer Correct Answer: C) Both of these. 11. What is the formula for calculating revenue deficit? A) Revenue deficit = Revenue receipts-Revenue expenditure. B) Revenue deficit = Capital receipts-Revenue expenditure. C) Revenue deficit = Revenue receipts + Capital receipts. D) Revenue deficit = Revenue expenditure-Revenue receipts. Show Answer Correct Answer: D) Revenue deficit = Revenue expenditure-Revenue receipts. 12. Primary deficit in a government budget is ..... A) Fiscal deficit-interest payment. B) Total expenditure-total receipts. C) Revenue expenditure-Revenue receipts. D) Revenue deficit-interest payment. Show Answer Correct Answer: A) Fiscal deficit-interest payment. 13. How does a Surplus Budget impact the economy? A) It results in inflation due to excessive money supply. B) It causes a decrease in public investments. C) It indicates a healthy financial position of the government. D) It leads to increased government spending on infrastructure. Show Answer Correct Answer: C) It indicates a healthy financial position of the government. 14. Which of the following is an indirect tax? A) Corporation tax. B) Value Added tax. C) Income tax. D) Wealth tax. Show Answer Correct Answer: B) Value Added tax. 15. Which of the following is a characteristic of revenue receipts? A) They increase government liabilities. B) They are only collected from public enterprises. C) They do not reduce government assets. D) They are always collected through taxes. Show Answer Correct Answer: C) They do not reduce government assets. 16. Which one of the following is a part of capital expenditure? A) Interest paid on national debt. B) Expenditure on construction of roads. C) Salary paid to government employees. D) Pension paid to retired government employees. Show Answer Correct Answer: B) Expenditure on construction of roads. 17. Which of the following is a capital receipt A) Income Tax. B) Sale of shares of a public sector undertaking to Reliance Industries. C) Interest Income. D) Dividends from a PSU. Show Answer Correct Answer: B) Sale of shares of a public sector undertaking to Reliance Industries. 18. Which of the following is NOT a component of revenue receipts? Choose the correct option. A) Corporation tax. B) Customs duties. C) Personal income tax. D) Sale of shares in Public Sector Undertakings. Show Answer Correct Answer: D) Sale of shares in Public Sector Undertakings. 19. The expenditure which do not create assets for the government is called A) Revenue expenditure. B) Capital expenditure. C) Both (a) and (b). D) None of the above. Show Answer Correct Answer: A) Revenue expenditure. 20. Fill in the blank:Proportional taxes reduce the autonomous expenditure multiplier because taxes reduce the marginal propensity to ..... out of income. A) Consume. B) Invest. C) Borrow. D) Save. Show Answer Correct Answer: A) Consume. 21. Which statement(s) is/are correct regarding capital receipts? A) They create assets. B) They create liability. C) They reduce assets. D) They reduce assets and (or) create liability. Show Answer Correct Answer: D) They reduce assets and (or) create liability. 22. Revenue earned by government from the property without any legal heir is called; A) Donation. B) Escheat. C) Special assessment. D) Both bnc. Show Answer Correct Answer: B) Escheat. 23. Which of the following are the objectives of government budget? A) Distribution of income and wealth. B) Economic stability. C) GDP growth. D) All of these. Show Answer Correct Answer: D) All of these. 24. Which of the following are capital receipts of the Government? A) Recovery of loan. B) Borrowings. C) Disinvestment. D) All of these. Show Answer Correct Answer: D) All of these. 25. Loans to state governments and union territories are a part of A) Capital Expenditure. B) Revenue Receipts. C) Revenue Expenditure. D) Capital Receipts. Show Answer Correct Answer: A) Capital Expenditure. 26. Which one of the following is not an objective of government budget? A) Reallocation of resources. B) Economic stability. C) Increasing regional disparities. D) Economic growth. Show Answer Correct Answer: C) Increasing regional disparities. 27. What is the main objective of the government budget? A) To maximize government revenue through taxation. B) To promote only private sector growth. C) To reduce the size of the public sector. D) To increase the welfare of the people by intervening in the economy. Show Answer Correct Answer: D) To increase the welfare of the people by intervening in the economy. 28. What does the Revenue Budget include? A) Only capital expenditure. B) Revenue receipts and revenue expenditure. C) Only tax revenues. D) Only capital receipts. Show Answer Correct Answer: B) Revenue receipts and revenue expenditure. 29. Fill in the blank:Interest payments on market loans, external loans and from various reserve funds constitute the single largest component of ..... revenue expenditure. A) Capital. B) Non-plan. C) Contingency. D) Development. Show Answer Correct Answer: B) Non-plan. 30. The role of built-in stabilisers in the economy during boom and slump years is to: A) Automatically moderate fluctuations in economic activity. B) Increase government spending during booms. C) Eliminate unemployment completely. D) Fix interest rates at a constant level. Show Answer Correct Answer: A) Automatically moderate fluctuations in economic activity. 31. Which of the following is an example of capital expenditure? A) Interest payments. B) Purchase of machinery. C) Subsidies. D) Payment of salaries. Show Answer Correct Answer: B) Purchase of machinery. 32. Which of following is diret tax? A) Custom duty. B) Excise duty. C) Sale tax. D) Income tax. Show Answer Correct Answer: D) Income tax. 33. Fill in the blank:The three functions of allocation, redistribution and stabilisation operate through the ..... and receipts of the government. A) Investments. B) Taxation. C) Loans. D) Expenditure. Show Answer Correct Answer: D) Expenditure. 34. What is the period of a fiscal year? A) 1 april to 31 march. B) 1 january to 31 december. C) 1 march to 28 february. D) None of these. Show Answer Correct Answer: A) 1 april to 31 march. 35. Which one of them is direct tax? A) Income tax. B) GST. C) Special Assessment. D) Escheat. Show Answer Correct Answer: A) Income tax. 36. What is the purpose of Public Expenditure in the Government Budget? A) Expenses incurred by the government for the maintenance of the government and welfare of the society. B) Expenses incurred by private individuals only. C) Expenses incurred for international trade agreements. D) Expenses incurred for military purposes only. Show Answer Correct Answer: A) Expenses incurred by the government for the maintenance of the government and welfare of the society. 37. Given the formula for the change in equilibrium income for a change in transfers:$\Delta$Y = (c / (1-c)) $\Delta$TR, what does 'c' represent in this formula? A) Government expenditure multiplier. B) Marginal propensity to consume. C) Autonomous spending. D) Marginal propensity to save. Show Answer Correct Answer: B) Marginal propensity to consume. 38. Which of the following budget is suitable for developing economies? A) Deficit Budget. B) Balanced Budget. C) Surplus Budget. D) None of these. Show Answer Correct Answer: A) Deficit Budget. 39. Law and order, national defense, sanitation, etc are A) Final goods. B) Public goods. C) Intermediate goods. D) Private goods. Show Answer Correct Answer: B) Public goods. 40. Fill in the blank:The budget, which gives a statement of the receipts and expenditure of the government, is divided into the ..... budget and ..... budget. A) Gross, net. B) Primary, secondary. C) Fiscal, monetary. D) Revenue, capital. Show Answer Correct Answer: D) Revenue, capital. 41. Payment of salaries to the government employees is a capital payment. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: B) FALSE. 42. Which of the following is implication of fiscal deficit? A) Debt trap. B) Inflationary pressure. C) Erosion of government credibility. D) All of these. Show Answer Correct Answer: D) All of these. 43. Which of the following is a non tax eceipts? A) Sale tax. B) Gift tax. C) Donations. D) Excise duty. Show Answer Correct Answer: C) Donations. 44. What is the main document of the government that presents the estimated receipts and expenditures for every financial year? A) Annual Financial Statement (main budget document). B) Economic Survey. C) Appropriation Bill. D) Finance Bill. Show Answer Correct Answer: A) Annual Financial Statement (main budget document). 45. The amount collected by the government as taxes and duties is known as ..... A) Capital receipts. B) Tax revenue receipts. C) Non tax revenue receipts. D) All of these. Show Answer Correct Answer: B) Tax revenue receipts. 46. What are Revenue Receipts in the Government Budget? A) Receipts from selling government assets. B) Receipts from borrowing money. C) Receipts which do not create any liability or reduce the assets of the government. D) Receipts from international donations only. Show Answer Correct Answer: C) Receipts which do not create any liability or reduce the assets of the government. 47. When government spends more than it collects by way of revenue, it incurs ..... A) Revenue Expenditure. B) Capital Expenditure. C) Budget Deficit. D) Budget surplus. Show Answer Correct Answer: C) Budget Deficit. 48. The three functions of allocation, redistribution, and stabilization are operated through the expenditure and receipts of the government. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 49. Disinvestment comes under which category? A) Capital receipts. B) Capital expenditure. C) Revenue receipts. D) Revenue expenditure. Show Answer Correct Answer: A) Capital receipts. 50. Those receipts which do not create any corresponding liability for the government are called: A) Revenue receipts. B) Capital receipts. C) Revenue expenditure. D) Both b and c. Show Answer Correct Answer: A) Revenue receipts. 51. Corporate tax is a capital receipt. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 52. What is the full form of GST as mentioned in the passage? A) Goods and Service Tax. B) General Sales Tariff. C) Gross Service Transaction. D) Government Sales Tax. Show Answer Correct Answer: A) Goods and Service Tax. 53. What type of tax is characterized by a higher rate for higher incomes? A) Regressive tax. B) Progressive tax. C) Indirect tax. D) Proportional tax. Show Answer Correct Answer: B) Progressive tax. 54. In government, budget primary deficit is ₹ 10000 crore, interest payment is ₹ 5000 crore, then fiscal deficit is ₹ ..... crore. A) 18000. B) 16000. C) 15000. D) 5000. Show Answer Correct Answer: C) 15000. 55. What are the three statements the central government is required to lay before both Houses of Parliament as per the passage? A) Medium-term Fiscal Policy Statement, The Fiscal Policy Strategy Statement, The Macroeconomic Framework Statement. B) Annual Budget Statement, Appropriation Bill, Finance Bill. C) Economic Survey, Demand for Grants, Appropriation Accounts. D) Public Accounts Statement, Revenue Deficit Statement, Capital Expenditure Statement. Show Answer Correct Answer: A) Medium-term Fiscal Policy Statement, The Fiscal Policy Strategy Statement, The Macroeconomic Framework Statement. 56. Expenditure on salaries is an example of A) Revenue receipts. B) Capital expenditure. C) Capital receipts. D) Revenue expenditure. Show Answer Correct Answer: D) Revenue expenditure. 57. The revenue account of the government budget is also called the ..... A) Revenue budget. B) Fiscal deficit. C) Primary account. D) Capital budget. Show Answer Correct Answer: A) Revenue budget. 58. What is the formula for the government expenditure multiplier? A) 1 / c. B) (1-c) / c. C) 1 / (1-c). D) C / (1-c). Show Answer Correct Answer: C) 1 / (1-c). 59. Borrowing in govt. budget is: A) Primary deficit. B) Fiscal deficit. C) Revenue deficit. D) Deficit in taxes. Show Answer Correct Answer: B) Fiscal deficit. 60. Revenue deficit is a part of fiscal deficit. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 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