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 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 2 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The programme and policies of the government as presented in the budget are know as ..... policy of the government. A) Fiscal. B) Monetary. C) All the above. D) None of the above. Show Answer Correct Answer: A) Fiscal. 2. Which of the following is a non-tax receipt? A) Gift tax. B) Excise duty. C) Donations. D) Sales tax. Show Answer Correct Answer: C) Donations. 3. Capital receipts is that receipts of the Government- A) (1) creates a liability. B) (2) reduce the assets. C) Both (1) and (2). D) None. Show Answer Correct Answer: C) Both (1) and (2). 4. In the government budget, if revenue receipts = ₹ 100 lakh, capital receipt = ₹ 50 lakh and revenue deficit = ₹ 25 lakh, how much is the revenue expenditure? A) 50 lakh. B) 150 lakh. C) 125 lakh. D) 75 lakh. Show Answer Correct Answer: C) 125 lakh. 5. Suppose the marginal propensity to consume is 0.75 and we have lump-sum taxes. If government purchases increase by 20, what is the change in equilibrium income? A) The change in equilibrium income is 40. B) The change in equilibrium income is 60. C) The change in equilibrium income is 100. D) The change in equilibrium income is 80. Show Answer Correct Answer: D) The change in equilibrium income is 80. 6. It affects the assets and liabilities of the govt. A) Taxes. B) Disinvestment. C) Fees and fines. D) Forfeiture of bonds. Show Answer Correct Answer: A) Taxes. 7. An annual statement of the estimated receipts and expenditure of the government over the fiscal year is known as: A) ACCOUNTS. B) EXPENDITURE. C) BUDGET. D) INCOME ESTIMATES. Show Answer Correct Answer: C) BUDGET. 8. What happens to the marginal propensity to consume (mpc) out of income when proportional taxes are introduced? A) The mpc out of income falls to c(1-t). B) The mpc out of income rises to c + t. C) The mpc out of income remains unchanged at c. D) The mpc out of income becomes zero. Show Answer Correct Answer: A) The mpc out of income falls to c(1-t). 9. What is one measure to correct government deficits? A) Increase tax evasion. B) Cut government subsidies. C) Reduce public investment. D) Increase subsidies without limits. Show Answer Correct Answer: B) Cut government subsidies. 10. If borrowing and other liabilities are removed from the budget deficits we get ..... : A) Fiscal Deficit. B) Primary Deficit. C) Capital Deficit. D) Revenue Deficit. Show Answer Correct Answer: B) Primary Deficit. 11. What is the main goal of the re-allocation of resources function? A) To eliminate all taxes. B) To reduce public sector investment. C) To allocate resources based on economic priorities. D) To increase government revenue. Show Answer Correct Answer: C) To allocate resources based on economic priorities. 12. Compare the value of the multiplier with lump-sum taxes and proportional taxes. Which one is smaller? A) The value of the multiplier with proportional taxes is smaller than with lump-sum taxes. B) The value of the multiplier with lump-sum taxes is smaller than with proportional taxes. C) The value of the multiplier is the same for both types of taxes. D) The value of the multiplier is not affected by the type of tax. Show Answer Correct Answer: A) The value of the multiplier with proportional taxes is smaller than with lump-sum taxes. 13. The fiscal deficit is the difference between the government's total expenditure and its total receipts excluding ..... A) Interest. B) Borrowing. C) Taxes. D) Spending. Show Answer Correct Answer: B) Borrowing. 14. Which of the following is an objective of Government Budget? A) Increasing income inequalities. B) Reducing employment opportunities. C) Destabilizing Economic Activities. D) Balanced regional growth. Show Answer Correct Answer: D) Balanced regional growth. 15. Disinvestment by govt. means: A) Selling of its fixed capital assets. B) Selling of shares of public enterprises held by it. C) Selling of its buildings. D) All the above. Show Answer Correct Answer: D) All the above. 16. If primary deficit is Rs. 3500 and interest payment is Rs. 500, then fiscal deficit is: A) 4100. B) 4200. C) 4000. D) 3000. Show Answer Correct Answer: C) 4000. 17. Fill in the blank:The budget is not merely a statement of receipts and expenditures. Since Independence, with the launching of the ..... Plans, it has also become a significant national policy statement. A) Decadal. B) Quarterly. C) Five-Year. D) Annual. Show Answer Correct Answer: C) Five-Year. 18. Fill in the blank:The central government shall not borrow from the Reserve Bank of India except by way of advances to meet temporary excess of cash disbursements over ..... A) Budget estimates. B) Fiscal deficit. C) Capital expenditure. D) Cash receipts. Show Answer Correct Answer: D) Cash receipts. 19. Which is a component of Budget Receipts A) Revenue receipts. B) Capital receipts. C) Both (a) and (b). D) None of the above. Show Answer Correct Answer: C) Both (a) and (b). 20. Public goods must be provided by the government because: A) They are non-excludable and non-rivalrous, making private provision inefficient. B) They are always profitable for private companies. C) They can only be used by a single individual at a time. D) They are only needed in emergencies. Show Answer Correct Answer: A) They are non-excludable and non-rivalrous, making private provision inefficient. 21. Subsidies are offered by government: A) To encourage the production of certain goods. B) To encourage the consumption of certain goods. C) To discourage the consumption of certain goods. D) Both (a) and (b). Show Answer Correct Answer: D) Both (a) and (b). 22. The proportional income tax acts as an automatic stabiliser by making disposable income and consumer spending less sensitive to fluctuations in GDP. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 23. The primary deficit in a government budget will be zero, when ..... A) Fiscal deficit is zero. B) Fiscal deficit is equal to interest payment. C) Revenue deficit is zero. D) Net interest payments are zero. Show Answer Correct Answer: B) Fiscal deficit is equal to interest payment. 24. Borrowing in the government budget is: A) Fiscal deficit. B) Deficit in taxes. C) Primary deficit. D) Revenue deficit. Show Answer Correct Answer: A) Fiscal deficit. 25. What is the main purpose of Revenue Expenditures in the Government Budget? A) Expenses for military purposes only. B) Expenses that do not create any asset nor reduce the liability of the government. C) Expenses for long-term investments only. D) Expenses for international trade agreements. Show Answer Correct Answer: B) Expenses that do not create any asset nor reduce the liability of the government. 26. According to the Fiscal Responsibility and Budget Management Act, 2003 (FRBMA), what is the maximum fiscal deficit as a percentage of GDP that the central government must aim for? A) 3 percent. B) 2 percent. C) 5 percent. D) 4 percent. Show Answer Correct Answer: A) 3 percent. 27. What is a balanced budget? A) When expenditures exceed revenues. B) When expenditures equal revenues. C) When there is no budget at all. D) When revenues exceed expenditures. Show Answer Correct Answer: B) When expenditures equal revenues. 28. The Reserve Bank of India must not subscribe to the primary issues of central government securities from the year 2006-07. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 29. Deficit budget refers to that situation in which governments budget expenditure is- A) Less than its budget receipts. B) More than its budget receipts. C) Equal its budget receipts. D) None of these. Show Answer Correct Answer: B) More than its budget receipts. 30. What are the two aspects of Budgetary policy? A) Revenue aspect and expenditure aspect. B) Public and private sector aspect. C) Investment aspect and savings aspect. D) Tax aspect and subsidy aspect. Show Answer Correct Answer: A) Revenue aspect and expenditure aspect. 31. Which of the following is a component of Revenue Expenditures in the Government Budget? A) Research and Development expenses. B) Interest Payment. C) Export subsidies. D) Investment in infrastructure. Show Answer Correct Answer: B) Interest Payment. 32. What distinguishes Capital Expenditures from Revenue Expenditures in the Government Budget? A) Capital Expenditures are for long-term investments, while Revenue Expenditures are for day-to-day expenses. B) Capital Expenditures are higher in amount than Revenue Expenditures. C) Capital Expenditures do not create any assets, unlike Revenue Expenditures. D) Capital Expenditures are related to international trade, while Revenue Expenditures are not. Show Answer Correct Answer: A) Capital Expenditures are for long-term investments, while Revenue Expenditures are for day-to-day expenses. 33. What is the significance of Revenue Receipts in the Government Budget? A) Generating income for the government through taxes and other sources. B) Reducing government expenses. C) Providing subsidies to the public. D) Increasing government debts. Show Answer Correct Answer: A) Generating income for the government through taxes and other sources. 34. FOLLOWING IS AN EXAMPLE OF DIRECT TAX A) GOODS AND SERVICE TAX. B) VALUE ADDED TAX. C) INCOME TAX. D) EXCISE DUTY. Show Answer Correct Answer: C) INCOME TAX. 35. Electricity tax is levied by the State Government A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 36. What is the formula for Gross fiscal deficit as given in the text? A) Gross fiscal deficit = Total expenditure-(Revenue receipts + Non-debt creating capital receipts). B) Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad. C) Gross fiscal deficit = Total receipts-Total expenditure. D) Gross fiscal deficit = Revenue deficit + Capital expenditure. Show Answer Correct Answer: A) Gross fiscal deficit = Total expenditure-(Revenue receipts + Non-debt creating capital receipts). 37. One of the main criticisms of deficits is that they are inflationary. According to the passage, this criticism is not necessarily true when: A) There is unused productive capacity in the economy. B) Interest rates are high. C) Exports exceed imports. D) The government increases taxes. Show Answer Correct Answer: A) There is unused productive capacity in the economy. 38. Which objective government attempt to obtain by budget A) To promote economic development. B) Balanced regional development. C) Redistribution of income and wealth. D) All of these. Show Answer Correct Answer: D) All of these. 39. Fill in the blank:Capital expenditure includes expenditure on the acquisition of land, building, machinery, equipment, investment in shares, and loans and advances by the central government to state and union territory governments, PSUs and other ..... A) Ministries. B) Employees. C) Departments. D) Parties. Show Answer Correct Answer: D) Parties. 40. Fiscal deficit = A) Fiscal deficit-intrest payment. B) Revenue expenditure-revenue receipts. C) Total expenditure-total receipts other than borrowing. D) Capital expenditure-capital receipts. Show Answer Correct Answer: C) Total expenditure-total receipts other than borrowing. 41. Grants by the government are treated as revenue expenditure. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 42. Ptrogressive tax is a tax whch is- A) Charged at decreasing rate when income of individual increase. B) Charged at increaing rate when income of individual increase. C) A fixed percentage of an individual income. D) None of these. Show Answer Correct Answer: B) Charged at increaing rate when income of individual increase. 43. Following is the feature of direct taxes A) Direct taxes are imposed on goods and services. B) Their burden can be shifted to others. C) Their impact and ultimate burden lie on the same person. D) They tend to raise the price of goods. Show Answer Correct Answer: C) Their impact and ultimate burden lie on the same person. 44. Fill in the blank:Government deficit can be reduced by an increase in taxes or reduction in ..... A) Interest rates. B) Exports. C) Population. D) Expenditure. Show Answer Correct Answer: D) Expenditure. 45. Fill in the blank:The intervention of the government, whether to expand demand or reduce it, constitutes the ..... function. A) Stabilisation. B) Allocation. C) Production. D) Distribution. Show Answer Correct Answer: A) Stabilisation. 46. Progressive tax is a tax which is- A) Charged at decreasing rate when income of individual increase. B) Charged at increaing rate when income of individual increase. C) A fixed percentage of an individual income. D) None of these. Show Answer Correct Answer: B) Charged at increaing rate when income of individual increase. 47. According to the passage, from which date did GST become operational in India? A) 1 July 2017. B) 1 January 2015. C) 1 April 2016. D) 15 August 2018. Show Answer Correct Answer: A) 1 July 2017. 48. What is the implication of a high fiscal deficit? A) Lower interest rates. B) Increased government credibility. C) Increased national debt. D) Higher GDP growth. Show Answer Correct Answer: C) Increased national debt. 49. Which statement(s) is/are correct regarding revenue receipts? A) They reduce liability. B) They reduce assets. C) They do not create liability. D) They create assets. Show Answer Correct Answer: C) They do not create liability. 50. Which of the following is correct in case of revenue expenditure? A) It reduces liability of the government. B) It does not create any assets for the government. C) It creates asset for the government. D) None of these. Show Answer Correct Answer: B) It does not create any assets for the government. 51. Tax and Non-Tax receipts are components of A) Revenue receipts. B) Capital receipts. C) Both (a) & (b). D) None of these. Show Answer Correct Answer: A) Revenue receipts. 52. FOLLOWING IS AN EXAMPLE OF INDIRECT TAX A) CORPORATION TAX. B) GOODS AND SERVICE TAX. C) WEALTH TAX. D) NONE OF THESE. Show Answer Correct Answer: B) GOODS AND SERVICE TAX. 53. Expenditure on old age pension is an example of revenue expenditure A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 54. In Example 5.2, if the tax rate is 0.25 and the marginal propensity to consume (c) is 0.8, what is the new government expenditure multiplier? A) 4.0. B) 3.2. C) 2.5. D) 1.6. Show Answer Correct Answer: C) 2.5. 55. Plan revenue expenditure relates to central Plans (the Five-Year Plans) and central assistance for State and Union Territory plans. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 56. What is fiscal deficit? A) Excess of total receipts over total expenditure. B) Excess of total expenditure over total receipts excluding borrowing. C) A surplus in the budget. D) Equal total receipts and total expenditure. Show Answer Correct Answer: B) Excess of total expenditure over total receipts excluding borrowing. 57. Borrowings by the government is a: A) Revenue receipt. B) Capital expenditure. C) Capital receipts. D) Revenue expenditure. Show Answer Correct Answer: C) Capital receipts. 58. What is the difference between revenue receipts and capital receipts? A) Revenue receipts create liabilities. B) Capital receipts are always higher. C) Revenue receipts do not create liabilities. D) Capital receipts are regular and recurring. Show Answer Correct Answer: C) Revenue receipts do not create liabilities. 59. What does Fiscal Deficit refer to in the Government Budget? A) Total government expenditure is in excess of total government receipts other than the borrowings. B) Total government expenditure is in excess of total government receipts including borrowings. C) Total government expenditure is equal to total government receipts. D) Total government expenditure is less than total government receipts. Show Answer Correct Answer: A) Total government expenditure is in excess of total government receipts other than the borrowings. 60. Revenue budget includes: A) Revenue receipts of the government. B) Revenue expenditure of the government. C) Capital expenditure of the government. D) Both (a) and B. Show Answer Correct Answer: D) Both (a) and B. ← PreviousNext →Related QuizzesCommerce QuizzesClass 12 QuizzesClass 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 1Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 3Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 4Class 12 Economics (Macro Economics) Chapter 1 Introduction QuizClass 12 Economics (Macro Economics) Chapter 2 National Income Accounting QuizClass 12 Economics (Macro Economics) Chapter 3 Money And Banking QuizClass 12 Economics (Macro Economics) Chapter 4 Determination Of Income And Employment QuizClass 12 Economics (Macro Economics) Chapter 6 Open Economy Macroeconomics Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books