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Class 12 Economics (Macro Economics) Chapter 5 Government Budget And The Economy Quiz 9 (25 MCQs)

Quiz Instructions

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1. Fill in the blank:The government may spend an amount equal to the revenue it collects. This is known as a ..... budget.

Correct Answer: A) Balanced.

2. What is the main objective of Government Budget in terms of economic stability?

Correct Answer: B) Stabilizing Economic Activities.

3. What does capital receipts refer to?

Correct Answer: D) Both A and C.

4. The passage argues that debt owed to foreigners does not matter because purchasing power remains within the nation.

Correct Answer: B) False.

5. Which of the following is a correct measure of primary deficit?

Correct Answer: A) Fiscal deficit-Revenue deficit.

6. Which of the following best describes capital receipts?

Correct Answer: B) Receipts that create liability for the government.

7. What is the annual statement of the government's fiscal revenue and fiscal expenditure known?

Correct Answer: B) Fiscal budget.

8. Which of the following is NOT a feature of public goods?

Correct Answer: C) They are always provided by private enterprises.

9. Revenue receipts are those receipts that do not lead to a claim on the government.

Correct Answer: A) True.

10. In the context of government budget which of the following statement is correct

Correct Answer: A) It is a statement of expected annual receipts and expenditures of the government.

11. The main purpose of the FRBM Review Committee as described in the passage is:

Correct Answer: A) To review and recommend changes to the Fiscal Responsibility and Budget Management Act.

12. Fill in the blank:When a government cuts taxes and runs a budget deficit, consumers may respond to their ..... income by spending more.

Correct Answer: A) After-tax.

13. True or False:The tax multiplier is always larger in absolute value compared to the government spending multiplier.

Correct Answer: B) False.

14. What is a characteristic of indirect taxes?

Correct Answer: C) They can be avoided by not consuming goods.

15. Identify capital receipt from the following

Correct Answer: D) All of the above.

16. Zero primary deficit means

Correct Answer: B) The government has to resort to borrowing only to meet interest payments.

17. What is the main purpose of Capital Receipts in the Government Budget?

Correct Answer: B) Creating a liability or reducing government assets.

18. Fill in the blank:Public debt is burdensome if it reduces future growth in .....

Correct Answer: A) Output.

19. What is the primary deficit?

Correct Answer: C) Fiscal deficit minus interest payments.

20. Non-debt creating capital receipts are:

Correct Answer: A) Receipts that do not create any liability of repayment for the government.

21. What is the stabilisation function of the government budget?

Correct Answer: A) To correct fluctuations in income and employment.

22. What is the significance of a budget surplus?

Correct Answer: B) Indicates a government is earning more than it spends.

23. By borrowing, the government transfers the burden of reduced consumption on future generations. Why does this happen?

Correct Answer: A) 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.

24. Fill in the blank:If government deficits succeed in their goal of raising production, there will be more income and, therefore, more .....

Correct Answer: A) Saving.

25. 'The fiscal deficit gives the borrowing requirement of the government'. This statement means that:

Correct Answer: A) Fiscal deficit represents the total amount the government needs to borrow to meet its expenditure.

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