Class XII Economics - Government Budget Case Study

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Class XII Economics - Government Budget Case Study - ARQ-MCQ

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CASE STUDY- 1 Read the following hypothetical text and answer the given questions: -Public expenditure accelerates the pace of GDP growth. Higher rate of GDP growth is achieved through (a) investment expenditure in public sector enterprises, (b) capital grants by the government for the purchase of capital equipment, (c) subsidies for the purchase of inputs, and (d) purchase of farm output at the minimum support price. Public expenditure promotes equality in the distribution of income and wealth. This is achieved by offering old-age pensions, as well as by providing free food, education, and health services to the Below Poverty Line Population. Public expenditure plays a significant role in restoring economic stability. Particularly, when the economy is battling economic recession. The government expenditure(consumption expenditure as well as investment expenditure) raises the level of AD. Only when AD is raised that the vicious circle of economic recession is broken. Public expenditure generates investment-friendly environment in the economy. The government spends money on infrastructural development. It constructs roads, dams, bridges. It introduces faster and convenient means of transportation. Such facilities promote inducement to investment. Briefly, public expenditure is indispensable in any welfare state like India. It not only promotes GDP growth, but also promotes social welfare. 1. The construction of roads, dams, bridges is called *

1 point

Social development

Infrastructure development

Industrial development

Agrarian development

2. The government expenditure does not raise the level of AD *

1 point

True

False

3. Read the following statement Assertion (A): Public expenditure generates investment-friendly environment in the economy. Reason (R): It raises the infrastructural development in the economy. *

1 point

Both Assertion (A) and Reason (R) are true.

Both Assertion (A) and Reason (R) are false.

Assertion (A) is true and Reason (R) is false.

Assertion (A) is false and Reason (R) is true.

4. Which is included in the non- transfer income *

1 point

Old age pension

Subsidies

Retirement pension

Scholarship

CASE STUDY- 2 Read the following hypothetical text and answer the given questions: - GDP growth is the central objective of government budgetary policy. It is achieved in two ways: (i) by making public investment expenditure, and (ii) by inducing private investment expenditure (through tax rebates and subsidies). Allocation of Resources: Private enterprises will always desire to allocate resources to those areas of production where profits are high. However, it is possible that such areas of production (like production of alcohol) may not promote social welfare. Through its budgetary policy, the government of a country directs the allocation of resources in a manner such that there is a balance between the goals of profit maximisation and social welfare. Production of goods which are injurious to health (like Cigarettes and Whisky) is discouraged through heavy taxation. On the other hand, production of 'socially useful goods' (like, 'Khadi') is encouraged through subsidies. 1. Public enterprises will always desire to allocate resources to those areas of production, where: - *

1 point

Profits are high

Cost is low

Social welfare is high

Revenue is high

2. GDP growth is the central objective of government budgetary policy. *

1 point

True

False

3. Suitable title for the passage *

1 point

GDP

Private enterprises

Subsidies

Government Budget

ASSERTION AND REASON BASED QUESTIONS 1. Read the following statement Assertion (A): Cigarettes and Whisky are discouraged through heavy taxation.Reason (R): These are ‘socially useful goods' *

1 point

Both Assertion (A) and Reason (R) are true

Both Assertion (A) and Reason (R) are false.

Assertion (A) is true and Reason (R) is false.

Assertion (A) is false and Reason (R) is true.

2. Assertion (A): GST is an indirect tax. Reason (R): because it is imposed on goods and services. *

1 point

Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).

Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).

Assertion (A) is true and Reason (R) is false.

Assertion (A) is false and Reason (R) is true.

3. Assertion (A): borrowings are capital receipts but payment of interest on borrowings are revenue expenditure. Reason (R):borrowings creates liability but payment of interest does not reduce liability. *

1 point

Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).

Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).

Assertion (A) is true and Reason (R) is false.

Assertion (A) is false and Reason (R) is true.

4) Assertion (A): Fiscal deficit refers to total borrowings of government during a financial year. Reason (R): fiscal deficit creates burden on future generations. *

1 point

Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).

Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).

Assertion (A) is true and Reason (R) is false.

Assertion (A) is false and Reason (R) is true.

MULTIPLE CHOICE QUESTIONS 1. In the context of government budget which of the following statement is correct *

1 point

It is a statement of expected annual receipts and expenditures of the government

It is detail of actual receipts and expenditure of the government in a financial year

It offers a detailed description of achievements of the government during the five-year plans

It indicates bop status of the domestic economy

2. which of the following are the objective of government budget? *

1 point

distribution of income and wealth

economics stability

GDP growth

all of these

3. which of the following is a non-tax receipt? *

1 point

gift tax

sales tax

donations

excise duty

4. Progressive tax is a tax which is *

1 point

Charged at a decreasing rate when income of the individual increases

Charged at an increasing rate when income of the individual increases

A fixed percentage of an individual income

None of these

5. Revenue earned by the government from the property without any legal heir is called: *

1 point

donation

escheat

wealth tax

none of these

6. A tax the burden of which can be shifted on to others, is called: *

1 point

indirect tax

direct tax

wealth tax

none of these

7. Which one of the following is an indirect tax? *

1 point

Wealth tax

excise duty

income tax

none of these

8. which of the following is a direct tax? *

1 point

income tax

excise duty

sales tax

custom duty

9. tax that imposed on value added at the various stages of production is known as *

1 point

Corporate profit tax

Direct personal tax

Value added tax

None of these

10. Gift tax is a paper tax because *

1 point

It is an indirect tax

It is a direct tax

It does not have significant revenue yield

Both b and c

11. which of the following is not a non -tax receipt? *

1 point

fees

fine

gift tax

grants and donations

12. Which of the following is a part of the revenue expenditure in the Indian government budget? *

1 point

Interests’ payments

Defence purchases

Wage bill of the government

All of these

13. capital receipt is that receipt of the government which: *

1 point

creates a liability

reduces the assets

Either (a) or (b)

neither (a) or (b)

14. Which of the following are capital receipts of the government? *

1 point

Recovery of loans

Borrowings

Disinvestment

All of these

15. Capital expenditure is that estimated expenditure of the government by which *

1 point

Assets are increased

Liabilities are decreased

Either a or b

Assets and liabilities do not change

16. Deficit budget refers to that situation in which government’s budget expenditure is *

1 point

Less than its budget receipts

More than its budget receipts

Equal to its budget receipts

None of these

17. Fiscal deficit= *

1 point

Total expenditure- total receipts other than borrowing

Revenue expenditure- revenue receipts

Capital expenditure- capital receipts

Revenue expenditure+ capital expenditure- revenue receipts

18.In which of the following ways, can deficit in budget be financed *

1 point

Borrowing from RBI

Borrowing from the public

Both a and b

Neither a nor b

19. Which of the following is implication of fiscal deficit? *

1 point

Crowding- out

Inflationary spiral

Erosion of government credibility

All of these

20. A budget is a balanced one when *

1 point

Total expenditure= total receipts

Total expenditure<total receipts

Total expenditure>total receipts

None of these

21. Surplus budget is that budget where in *

1 point

Estimated revenue of the government= estimated expenditure of the government

Estimated revenue of the government< estimated expenditure of the government

Estimated revenue of the government> estimated expenditure of the government

None of these

22. the difference between fiscal deficit and interest payment is called: *

1 point

revenue deficit

primary deficit

budget deficit

capital deficit

23. If primary deficit is 3500 and interest payment is 500, then fiscal deficit is *

1 point

2900

4000

4100

4200

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