Class XII Economics - Indian Economic - Government Budget and The Economy HY

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CLASS 12 GOVERNMENT BUDGET AND THE ECONOMY 1. Primary deficit in a government budget will be zero, when. *

1 point

Revenue deficit is zero

Net interest payment is zero

Fiscal deficit is zero

Fiscal deficit is equal to interest payment

2. Which one of the following is not a capital expenditure? *

1 point

Loans advanced by World Bank

Construction of school building

Repayment of loans

Tax receipts.

3. Disinvestment by government means *

1 point

Selling of its fixed capital assets

Selling of shares of Public enterprises held by it

Selling of its building

All of above.

4. Primary Deficit equals: *

1 point

Borrowings

Interest payments

Borrowing less interest payments

Borrowing and Interest payments both

5. 'Subsidy received from World Bank' is a receipt of _________________ *

1 point

Revenue nature

Capital nature

Development charges

None of these.

6. What is the nature of income tax in India? *

1 point

Regressive

Proportional

Progressive

None of these.

7. ‘Recovery of loans' is a receipt of which of the following nature ___________________ *

1 point

Revenue

Capital

Either of the two

Neither of two.

8. Which of following is a non-tax revenue receipt? *

1 point

GST

Export duty

Development charges

Corporate tax.

CASE STUDY:1Read the following article and answer the questions given belowIndia has scaled back expenditure, including on productive assets that aid economic growth, as thegovernment is confronted with the risk of its budget deficit blowing out. Capital expenditure – theMoney spent on creating, maintaining, or improving fixed assets like roads and factories- stood at40% of the budgeted amount in the six months to September, down from 55.5% in the year-ago Period, data from the government's Controller General of Accounts show. The overall spending during the period was 49% of the budget aim compared to 53% last year. That's despite prime minister Narendra Modï's government outlining measures worth more than 21 trillion rupees ($ 281billion) to counter the economic and social fallout of the Covid-19 outbreak. A closer look at the numbers show the bulk of the spending was directed toward the poor and the farmers, with crucial sectors such as coal, power, shipping and steel receiving less than a third of their annual budget allocation. Spending on capital assets has so far trailed the so-called revenue expenditure that includes interest payments and overheads such as salaries, the data released last week showed. Modi's government placed spending curbs on some ministries from April through December to manage its cash flow. 9. A reduction in capital expenditure i.e., the money spent on creating maintaining or improving fixed assets is done to reduce the risk of _________deficit. (Choose the correct alternative) *

1 point

revenue

budget

10. Allocation of resources in the budget in the six months to September 2020 is directed towards_____________ (Choose the correct alternative) *

1 point

economic upliftment of the economy

social upliftment of the economy

the poor and the farmers

all of these

11. Capital expenditure refers to the estimated expenditure of the government in a fiscal year which____________ liabilities of the government. (Choose the correct alternative) *

1 point

reduces

increases

Either increases or decreases

12. Identify which of the following statements is false: (Choose the correct alternative) *

1 point

The government can finance its budgetary deficit through borrowings, disinvestment and deficit financing

Fiscal deficit equals borrowings

Recovery of loans is a revenue receipt

Interest on loans is a non-tax revenue receipt

CASE STUDY:2Read the following article and answer the questions given belowIn the year 2016-17, the government of Philippines had a budget deficit of $ 7 billion. Its revenuefrom direct and indirect taxes was not adequate to finance its spending. The Philippine governmentspent its deficit on infrastructure and education which will help to boost economic growth and willreduce unemployment. Government continued its deficit budget strategy in the year 2017-2018also. It helped in raising consumer's confidence. Indeed, in an international survey it was claimedthat consumer confidence in Philippines ranked highest in the world.Average household disposable income in Philippines during 2016 was $ 6000 with S 5000 beingspent on consumption. Thus, budget deficit proved to be biggest boon for Philippines economicgrowth.Besides wages in 2016 varied between different sectors. Wages in tertiary and manufacturing sectorWere higher than primary sector. It resulted a fall of Workers in primary sectors. Moreover, theproportion of workers in public sector was also on decline.Central Bank of Philippines has reduced its bank rate in order to reduce rate of interest. It helpedconsumers to buy more cars and other consumer durable goods. A fall in rate of interest was alsoencouraging producers to invest more tor capital formation and economicgrowth of the country. It has also resulted in fluctuations in the rate of inflation in different sectorsof the economy.13. Which of following caused budget deficit in Philippines? (Choose correct alternative) *

1 point

Excess expenditure

Less revenue from taxes

Increase in public expenditure

All of these.

14. Government expenditure on infrastructure and education helped in raising........

1 point

Unemployment

Consumer confidence

both a and b

NOTA

Clear selection

15. Fiscal deficit proved to be a ____________ for Philippines economy. *

1 point

boon

bane

16. During the year 2016-17, budget deficit in Philippines was to the extent of ________ *

1 point

$ 7 Billions

S 10 Billion

$ 70 Billions

None of these

CASE STUDY: 3 Read the following article and answer the questions given below Public expenditure has a typical nature of its spending Government plans its annual pending first and then its financing is planned. Whatever excess of annual expenditure is found over annual financing is known as 'Revenue deficit'. Such a deficit does not create any borrowing burden upon the economy. But when Capital expenditure is in excess of Capital receipts, it creates the burden of borrowing upon the economic system. Technically it is known as fiscal deficit. A constant rise in fiscal deficit is worry some for Economists as it becomes inflationary and creates unequal distribution of income. Economists, therefore set a maximum limit of 3% of GDP as fiscal deficits for the developing countries.We must note that the borrowing requirement of the government includes interest obligation on accumulated debts. To obtain an estimate of borrowing on account of current expendituresexceeding revenues, we need to calculate what has been called the primary deficit. It is simply fiscaldeficit minus interest payment. The main goal of calculating primary deficit is to focus on presentfiscal-imbalances. 17. Which of following is the benefits of fiscal deficit *

1 point

creates inflationary pressure

promotes capital formation

creates borrowing burden

none of these

18. Excess of fiscal deficit over primary deficit is ....... *

1 point

Borrowing

Borrowing less of interest payment

Interest Payment

Nota

19. Surplus Budget policy is used to ........ *

1 point

Increase money supply in the economy

Decrease money supply in the economy

20. Which of following is the demerit of fiscal deficit? *

1 point

Inflationary

Creates inequalities of distribution of income

Promotes borrowing burden

All of these.

CHAPTER: GOVERNMENT BUDGET AND ECONOMY.ASSERTION AND REASONING QUESTIONSRead the following statements Assertion (A) and Reason (R) .Choose one of the correctalternative given below:1. Assertion: The government uses fiscal instruments to improve the distribution of income Reason: Lower taxes can be imposed on rich people and higher taxes can be imposed on poorpeople. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

2. Assertion: Equitable distribution of income is a way to social justice Reason: Monetary policy uses the instruments of taxes and subsidy to establish equitableDistribution *

1 point

Both A and R are true and R is the correct explanation of A

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

3. Assertion: Budget is used as an instrument to combat deflation and inflation Reason: Budget plays a vital role in establishing economic stability. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

4. Assertion: Budget is used as an instrument an economic stability Reason : Budget controls the level of aggregate demand *

1 point

Both A and R are true and R is the correct explanation of A

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

5. Assertion: Government initiative to increase the level of aggregate of demand by increasing money supply in the economy Reason : Government increase the taxation and reduced the public expenditure during the pandemic *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

6. Assertion: International prices of crude oil are continuously falling Reason : India subsidises domestic consumers of petroleum products *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

7. Assertion: Continuation of covid -19 pandemic will affect union budget Reason: The Revenue expenditure of government increases *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false

A is false but R is true.

8. Assertion: In the process of development , construction of dams ,new schools new plants,and repayment of loans is essential Reason: Capital expenditure creates the assets of the government and causes reduction in the liabilities of the government *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

9. Assertion: High Fiscal deficit throws a country into the debt trap and enhances foreign dependence. Reason: Fiscal discipline of any country establishes the credibility of country’s creditworthiness. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A

A is true but R is false.

A is false but R is true.

10. Assertion: Budget is presented every year in lok sabha by finance minister of India Reason: Monetary policy of India is prepared every quarter by the RBI *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

11. Assertion: Dividends on Investments made by government is revenue receipt Reason: Capital receipt adds to the assets of the government *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

12. Assertion: Taxes reforms helped Indian economy to meet the fiscal target.Reason: The government plans a significant cut in its expenditure and aiming at better tax Compliance. *

1 point

Both A and R are true and R is the correct explanation of A

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

13. Assertion: Borrowing from the rest of the world is a capital receipt Reason: Revenue receipt either creates liability or reduces the assets *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

14. Assertion: Fines and penalties are a source of non tax revenue for the government Reason: A fine of Rs 500 was imposed on not wearing a mask. *

1 point

Both A and R are true and R is the correct explanation of A

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

15. Assertion: Highway and road works are announced in Kerala ,Tamil Nadu and West Bengal in budget 2021.Reason: Such announcement will increase the revenue expenditure of the government *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

16. Assertion: Income tax is great source of the revenue of the government Reason: Income tax is a direct tax and the burden can be shifted. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

17. Assertion: Fiscal deficit shows a better position of the government expenditure in Comparison to budget deficit Reason: Fiscal deficit means borrowings of the government. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

18. Assertion: Strategic sale of Air India and IDBI to be completed in the fiscal year Reason: Strategic sale leads to loss of Revenue to the government. *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

19. Assertion: The Government may borrow from RBI against its securities to meet the fiscal deficit Reason: Borrowing from public is better than deficit financing because it does not increase the money supply. *

1 point

Both A and R are true and R is the correct explanation of A

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

20. .Assertion: Fiscal deficit may rise but primary deficit may or may not rise Reason: No relation between fiscal deficit and primary deficit *

1 point

Both A and R are true and R is the correct explanation of A.

Both A and R are true but R is not the correct explanation of A.

A is true but R is false.

A is false but R is true.

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