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 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 4 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. ..... is the difference between total receipts and total expenditure: A) Fiscal Deficit. B) Budget Deficit. C) Revenue Deficit. D) None of these. Show Answer Correct Answer: A) Fiscal Deficit. 2. What does the term 'budget deficit' mean? A) A budget deficit occurs when there is no expenditure. B) A budget deficit occurs when expenditure equals revenue. C) A budget deficit occurs when expenditure exceeds revenue. D) A budget deficit occurs when revenue exceeds expenditure. Show Answer Correct Answer: C) A budget deficit occurs when expenditure exceeds revenue. 3. According to the passage, what is Ricardian equivalence? A) The idea that government borrowing and taxation are equivalent means of financing expenditure. B) The idea that government borrowing increases national savings. C) The idea that government borrowing reduces inflation. D) The idea that government borrowing has no impact on future generations. Show Answer Correct Answer: A) The idea that government borrowing and taxation are equivalent means of financing expenditure. 4. Which one of the following is not a capital expenditure? A) Construction of school building. B) Repayment of loans. C) Loans advanced by World Bank. D) Tax receipts. Show Answer Correct Answer: D) Tax receipts. 5. Which of the following best describes a progressive tax system? A) Tax rates increase as income increases. B) Tax rates increase as income decreases. C) Tax rates are the same for all income levels. D) Tax rates are only applied to capital gains. Show Answer Correct Answer: A) Tax rates increase as income increases. 6. If primary deficit is 3000 and interest payment is 400, then fiscal deficit is A) 2600. B) 3400. C) 3000. D) 1000. Show Answer Correct Answer: B) 3400. 7. Tax revenue of the government includes A) Income text. B) Corporate tax. C) Excise duty. D) All of these. Show Answer Correct Answer: D) All of these. 8. Govt. budget is related to which of following period ..... ? A) Current year's income and expenditure. B) Last year's income and expenditure. C) Income and expenditure of commencing year. D) All of these. Show Answer Correct Answer: D) All of these. 9. According to the text, budget documents classify total expenditure into ..... and ..... expenditure. A) Fixed; variable. B) Revenue; capital. C) Direct; indirect. D) Plan; non-plan. Show Answer Correct Answer: D) Plan; non-plan. 10. What is a revenue deficit? A) Equal revenue receipts and expenditure. B) A surplus in the budget. C) Excess of revenue expenditure over revenue receipts. D) Excess of revenue receipts over revenue expenditure. Show Answer Correct Answer: C) Excess of revenue expenditure over revenue receipts. 11. Which of the following is a no-tax receipt? A) Gift tax. B) GST. C) Excise duty. D) Donations. Show Answer Correct Answer: D) Donations. 12. Fill in the blankFiscal deficit-Primary deficit = A) Capital expenditure. B) Borrowings requirements of the government. C) Revenue deficit. D) Interest payments. Show Answer Correct Answer: D) Interest payments. 13. A direct tax is a tax that is imposed on which of the following? A) Corporation's only. B) Individuals only. C) None of these. D) Individuals and Corporations. Show Answer Correct Answer: D) Individuals and Corporations. 14. What is the Government Budget? A) A plan for military spending. B) A summary of tax evasion cases. C) A report on foreign investments. D) A statement of estimated receipts and expenditures. Show Answer Correct Answer: D) A statement of estimated receipts and expenditures. 15. Fill in the blank:The government may spend an amount equal to the revenue it collects. This is known as a ..... budget. A) Balanced. B) Surplus. C) Capital. D) Deficit. Show Answer Correct Answer: A) Balanced. 16. What is the main objective of Government Budget in terms of economic stability? A) Reducing employment opportunities. B) Creating income inequalities. C) Stabilizing Economic Activities. D) Destabilizing Economic Activities. Show Answer Correct Answer: C) Stabilizing Economic Activities. 17. What does capital receipts refer to? A) Receipts that create a liability. B) Regular income from taxes. C) Non-recurring income. D) Both A and C. Show Answer Correct Answer: D) Both A and C. 18. The passage argues that debt owed to foreigners does not matter because purchasing power remains within the nation. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 19. Which of the following is a correct measure of primary deficit? A) Revenue deficit-Interest payments. B) Fiscal deficit-Interest payments. C) Fiscal deficit-Revenue deficit. D) Capital expenditure-Revenue expenditure. Show Answer Correct Answer: C) Fiscal deficit-Revenue deficit. 20. Which of the following best describes capital receipts? A) Receipts that are non-redeemable. B) Receipts from service tax. C) Receipts from indirect taxes. D) Receipts that create liability for the government. Show Answer Correct Answer: D) Receipts that create liability for the government. 21. What is the annual statement of the government's fiscal revenue and fiscal expenditure known? A) Budget. B) Fiscal budget. C) Capital budget. D) All of these. Show Answer Correct Answer: B) Fiscal budget. 22. Which of the following is NOT a feature of public goods? A) They are always provided by private enterprises. B) They are non-rivalrous. C) They are collectively consumed. D) They are non-excludable. Show Answer Correct Answer: A) They are always provided by private enterprises. 23. Revenue receipts are those receipts that do not lead to a claim on the government. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: A) True. 24. In the context of government budget which of the following statement is correct A) It is a statement of expected annual receipts and expenditures of the government. B) It is detail of actual receipts and expenditure of the government in a financial year. C) It offers a detailed description of achievements of the government during the five-year plans. D) It indicates bop status of the domestic economy. Show Answer Correct Answer: A) It is a statement of expected annual receipts and expenditures of the government. 25. The main purpose of the FRBM Review Committee as described in the passage is: A) To review and recommend changes to the Fiscal Responsibility and Budget Management Act. B) To implement new tax policies. C) To oversee the functioning of the Reserve Bank of India. D) To regulate foreign direct investment. Show Answer Correct Answer: A) To review and recommend changes to the Fiscal Responsibility and Budget Management Act. 26. Fill in the blank:When a government cuts taxes and runs a budget deficit, consumers may respond to their ..... income by spending more. A) Gross. B) Nominal. C) After-tax. D) Potential. Show Answer Correct Answer: C) After-tax. 27. True or False:The tax multiplier is always larger in absolute value compared to the government spending multiplier. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 28. What is a characteristic of indirect taxes? A) They are progressive in nature. B) They can be avoided by not consuming goods. C) They are imposed on income. D) They are paid directly by individuals. Show Answer Correct Answer: B) They can be avoided by not consuming goods. 29. Identify capital receipt from the following A) Post office deposits. B) Recovery of loans. C) Disinvestment. D) All of the above. Show Answer Correct Answer: D) All of the above. 30. Zero primary deficit means A) No borrowing. B) The government has to resort to borrowing only to meet interest payments. C) No liabilities with government. D) No interest payments. Show Answer Correct Answer: B) The government has to resort to borrowing only to meet interest payments. 31. What is the main purpose of Capital Receipts in the Government Budget? A) Paying off government debts. B) Creating a liability or reducing government assets. C) Increasing government expenses. D) Providing subsidies to the public. Show Answer Correct Answer: B) Creating a liability or reducing government assets. 32. Fill in the blank:Public debt is burdensome if it reduces future growth in ..... A) Inflation. B) Imports. C) Taxes. D) Output. Show Answer Correct Answer: D) Output. 33. What is the primary deficit? A) Total liabilities of the government. B) Fiscal deficit minus interest payments. C) Total expenditure minus total receipts. D) Revenue deficit plus capital expenditure. Show Answer Correct Answer: B) Fiscal deficit minus interest payments. 34. Non-debt creating capital receipts are: A) Receipts that increase the government's debt. B) Receipts that are always in the form of loans. C) Receipts that are only from foreign sources. D) Receipts that do not create any liability of repayment for the government. Show Answer Correct Answer: D) Receipts that do not create any liability of repayment for the government. 35. What is the stabilisation function of the government budget? A) To correct fluctuations in income and employment. B) To increase only the government revenue. C) To reduce only the government expenditure. D) To privatize public sector undertakings. Show Answer Correct Answer: A) To correct fluctuations in income and employment. 36. What is the significance of a budget surplus? A) Indicates a balanced budget. B) Indicates a government is spending more than it earns. C) Indicates a government is earning more than it spends. D) Indicates high levels of public debt. Show Answer Correct Answer: C) Indicates a government is earning more than it spends. 37. By borrowing, the government transfers the burden of reduced consumption on future generations. Why does this happen? A) Because it increases private sector savings. B) Because it increases current taxes. C) Because it reduces government spending. D) Because it borrows by issuing bonds to the people living at present but may decide to pay off the bonds some twenty years later by raising taxes. Show Answer Correct Answer: D) Because it borrows by issuing bonds to the people living at present but may decide to pay off the bonds some twenty years later by raising taxes. 38. Fill in the blank:If government deficits succeed in their goal of raising production, there will be more income and, therefore, more ..... A) Taxation. B) Spending. C) Saving. D) Debt. Show Answer Correct Answer: C) Saving. 39. 'The fiscal deficit gives the borrowing requirement of the government'. This statement means that: A) Fiscal deficit represents the total amount the government needs to borrow to meet its expenditure. B) Fiscal deficit is the difference between exports and imports. C) Fiscal deficit is the surplus generated by the government. D) Fiscal deficit is the amount of money lent by the government to other countries. Show Answer Correct Answer: A) Fiscal deficit represents the total amount the government needs to borrow to meet its expenditure. 40. Interest payment are subtracted from which deficit to arrive at Primary Deficit: A) Revenue Deficit. B) Capital deficit. C) Fiscal Deficit. D) None of these. Show Answer Correct Answer: C) Fiscal Deficit. 41. What type of receipts does the government budget categorize as revenue receipts? A) Tax Receipts. B) Sale of assets. C) Borrowings. D) Disinvestment. Show Answer Correct Answer: A) Tax Receipts. 42. Dividend from PSUs is a part of A) Non-tax Revenue. B) Revenue receipts. C) Both (a) and (b). D) Neither (a) nor (b). Show Answer Correct Answer: C) Both (a) and (b). 43. The amount collected by the government in the form of interest, fees, and dividends is known as ..... A) Tax revenue receipts. B) Capital receipts. C) Non tax revenue receipts. D) None of these. Show Answer Correct Answer: C) Non tax revenue receipts. 44. Who are 'free-riders'? A) Consumers who do not pay for what they can get for free and for which there is no exclusive title to the property being enjoyed. B) Producers who charge extra for exclusive goods. C) Individuals who always pay for public services. D) Companies that provide free goods to everyone. Show Answer Correct Answer: A) Consumers who do not pay for what they can get for free and for which there is no exclusive title to the property being enjoyed. 45. Fill in the blank:The FRBMA requires the reduction in fiscal deficit by ..... per cent of GDP each year and the revenue deficit by ..... per cent. A) 0.3, 0.5. B) 0.5, 0.3. C) 0.2, 0.4. D) 0.4, 0.2. Show Answer Correct Answer: A) 0.3, 0.5. 46. Primary Deficit is a part of A) Fiscal Deficit. B) Interest payments. C) Revenue deficit. D) Borrowings. Show Answer Correct Answer: A) Fiscal Deficit. 47. Which article of the Indian Constitution requires the government to present a statement of estimated receipts and expenditures before the Parliament? A) Article 110. B) Article 112. C) Article 265. D) Article 324. Show Answer Correct Answer: B) Article 112. 48. Difference between fiscal deficit and intrest payment is called- A) Revenue deficit. B) Fiscal deficit. C) Primary deficit. D) None of the above. Show Answer Correct Answer: C) Primary deficit. 49. Suppose that for a particular economy, investment is equal to 200, government purchases are 150, net taxes (that is lump-sum taxes minus transfers) is 100 and consumption is given by C = 100 + 0.75Y. What is the equilibrium level of income (Y) in this economy? A) 1000. B) 1200. C) 1400. D) 800. Show Answer Correct Answer: B) 1200. 50. In an unbalanced budget: A) Income is greater than expenditure. B) Expenditure is higher relative to income. C) Deficit is covered by loans or printing of notes. D) Only (b) and (c). Show Answer Correct Answer: D) Only (b) and (c). 51. The difference between fiscal deficit and interest payment is called: A) Fiscal deficit. B) Primary deficit. C) Revenue deficit. D) None of these. Show Answer Correct Answer: B) Primary deficit. 52. Expenditure made on the establishment of the metro rail line in Delhi is a capital expenditure. A) TRUE. B) FALSE. C) All the above. D) None of the above. Show Answer Correct Answer: A) TRUE. 53. Which is the component of budget A) Budget receipt. B) Budget expenditure. C) Both of these. D) None of these. Show Answer Correct Answer: C) Both of these. 54. The growth of revenue deficit as a percentage of fiscal deficit points to an improvement in the quality of government expenditure involving higher capital formation. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 55. Which of the following is a measure to reduce fiscal deficit? A) Increase subsidies. B) Decrease tax revenue. C) Reduce public expenditure. D) Increase unproductive spending. Show Answer Correct Answer: C) Reduce public expenditure. 56. Which of the following is a type of revenue deficit? A) Revenue Expenditure-Revenue Receipts. B) Capital Expenditure-Capital Receipts. C) Fiscal Deficit-Interest Payments. D) Total Expenditure-Total Receipts. Show Answer Correct Answer: A) Revenue Expenditure-Revenue Receipts. 57. Which of the following is a source of non-tax revenue? A) Fees for government services. B) Income from taxes. C) Borrowings from the public. D) Customs duties. Show Answer Correct Answer: A) Fees for government services. 58. Amount of fiscal deficit is equal to- A) Disinvestment. B) Borrowings. C) Recovery of loans. D) All of these. Show Answer Correct Answer: B) Borrowings. 59. Which of the following is NOT a source of non-tax receipts? A) Fines and penalties. B) Fees for services. C) Interest on loans. D) Income tax. Show Answer Correct Answer: D) Income tax. 60. Which article of the Indian Constitution mandates the presentation of the annual financial statement? A) Article 112. B) Article 200. C) Article 101. D) Article 50. Show Answer Correct Answer: A) Article 112. ← PreviousRelated 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 2Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 3Class 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