MCQ Question for Class 12 Economics Chapter 11 Government Budget and Economy

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Government Budget and Economy Class 12 Economics MCQ Questions with Answers

Refer below for MCQ Class 12 Economics Chapter 11 Government Budget and Economy with solutions. Solve questions and compare with the answers provided below

Question. In the context of government budget, which of the following statements is correct?
(a) Budget is a statement of expected annual receipts and expenditures of the government
(b) It is the detail of actual receipts and expenditures 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

Question. Which of the following are the objectives of government budget?
(a) Redistribution of income wealth
(b) Economic stability
(c) GDP growth
(d) all of these

Question. Which of the following is a non-tax receipt?
(a) Gift tax
(b) sales tax
(c) donations
(d) Excise duty

Question. Progressive tax is a tax which is :
(a) Charged at a decreasing rate when income of the individual increases
(b) Charged at a increasing rate when income of the individual increases
(c) A fixed percentage of an individual income
(d) None of these

Question. Regressive tax is a tax which is :
(a) Charged at a increasing rate when income of the individual increases
(b) Charged at a decreasing rate when income of the individual increases
(c) Relatively a low percentage of an individual’s income
(d) None of these

Question. A tax, the burden of which can be shifted to others, is called:
(a) Indirect tax
(b) direct tax
(c) wealth tax
(d) none of these

Question. Tax, the impact of which lies on the person on whom it is legally imposed, is known as:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) none of these

Question. Which of the following is an indirect tax?
(a) Wealth tax
(b) Excise tax
(c) income tax
(d) none of these

Question. Which of the following is a direct tax?
(a) income tax
(b)Excise tax
(c) sales tax
(d) custom duty

Question. Tax is imposed on value added at the various stages of production is known as:
(a) Corporate profit tax
(b) direct personal tax
(c) value added tax
(d) none of these

Question. Taxes like wealth and gift tax in India which carry their significance in terms of revenue yield are called:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) paper taxes

Question. Which of the following is a non-tax receipt?
(a) Fees
(b) Fines
(c) gift tax
(d) grants and donations

Question. Which of the following is a part of the revenue expenditure in the Indian Government budget
(a) Interest payments
(b) Defence purchases all of these
(c) Wage bill of the government
(d) all of these

Question. Capital receipt is that receipt of the government which:
(a) creates a liability
(b) reduces the assets
(c) both (a) and (b)
(d) neither la) nor (b)

Question. Which of the following are capital receipts of the government?
(a) Recovery of loans
(b) Borrowings
(c) Disinvestment
(d) All of these

Question. Capital expenditure is that estimated expenditure of the government by which:
(a) assets are increased
(b) liability is decreased
(c)both (a) and (b)
(d) assets and liabilities do not change

Question. Deficit budget refers to that situation in which government’s budget expenditure is:
(a) less than its budget receipts
(b) more than its budget receipts
(c) equal to its budget receipts
(d) none of these

Question. Fiscal Deficit=
a) Total expenditure – Total receipts other than borrowing
(b) Revenue expenditure – Revenue receipts
(c) Capital expenditure Capital receipts
d) Revenue expenditure + Capital expenditure – Revenue receipts

Question. In which of the following ways, can deficit in budget be financed?
a) Borrowing from RBI
(b) Borrowing from the public
(c) both (a) and (b)
(d) Neither (a) nor (b)

Question. Which of the following is/are implication/s of fiscal deficit?
(a) Erosion of government credibility
(b) Inflationary spiral
(c) national debts for future generation
(d) none of these

Question. A budget is a balanced one when:
(a) Total expenditure = Total receipts
(b) Total expenditure< Total receipts (c) Total expenditure > Total receipts
(d) none of these

Question. Surplus budget is that budget wherein:
(a) Estimated revenue of the government Estimated expenditure of the government
(b) Estimated revenue of the government > Estimated expenditure of the government
(c) Estimated revenue of the government= Estimated expenditure of the government
(d) none of these

Question. The difference between fiscal deficit and interest payment is called:
(a) revenue deficit
(b) primary deficit
(c) budget deficit
(d) capital deficit

Question. If primary deficit is ₹ 6,900 and interest payment is ₹600, then fiscal deficit is:
(a) ₹ 6,300
(b) ₹7,500
(c) ₹27.400
(d) ₹7.300

Question. Expenditure on relief of earthquake victims is
(a) Non-plan expenditure 
(b) Plan expenditure
(c) Both (a) and (b)
(d) None of the above

Question. Which out of the following is a non-development expenditure:-
(a) Scientific research
(b) Social welfare
(c) Administration
(d) None of these

Question. Borrowing in the government budget is:
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes

Question. Goods and services provided by the market mechanism, i.e. by the exchange between individual consumers and producers are called ________.
(a) Private goods
(b) Public goods
(c) Marketable goods
(d) Economic goods

Question. Spot the revenue receipt:-
(a) Recovery of loans
(b) Borrowings
(c) External grants
(d) Disinvestment

Question. Cost of tax collection, cost of the audit and printing notes, pension, expenditure on defense, and law and order are treated as_______of the government.
(a) Government expenditure
(b) Revenue Expenditure
(c) Non-Development Expenditure
(d) All of the above

Question. Fiscal Deficit equals
(a) Interest Payments
(b) borrowings
(c) interest payments less borrowings
(d) borrowings less interest payments

Question. The primary deficit in a government budget refers to:-
(a) Borrowing requirements
(b) Interest payments requirements
(c) (a) less (b)
(d) (a) + (b)

Question. When the government receives money by way of loans or form the sale of its assets, such receipts are called _ in a government budget.
(a) Revenue receipts
(b) Capital receipts
(c) Planned receipts
(d) Non plan receipts

Question. Primary deficit in a government budget will be zero, when___________
(a) revenue deficit is zero
(b) net interest payments are zero
(c) fiscal deficit is zero
(d) fiscal deficit is equal to interest payment

Question. The primary deficit in a government budget equals:
(a) Interest payments
(b) Interest payments less borrowings
(c) Borrowings less interest payments
(d) None of these

Question. Zero primary deficit means:
(a) no liabilities with the government
(b) the government has to resort to borrowing only to meet interest payments
(c) no interest payments
(d) no current liabilities

Question. Which one of these is a revenue expenditure?
(a) Purchase of shares
(b) Loans advanced
(c) Expenditure and acquisition of land
(d) Subsidies

Question. Escheats is an example of:
(a) Capital receipts
(b) Revenue receipts
(c) Capital expenditure
(d) Revenue Expenditure

Question. Direct tax is called direct because it is collected directly from:
(a) The producers on goods produced
(b) The sellers on goods sold
(c) They buyers of goods
(d) The income earners

Question. In India, one rupee note is issued by:
(a) Reserve Bank of India
(b) Finance Ministry of Government of India
(c) State Bank of India
(d) None of these

Question. Which of the following budget is suitable for developing economies?
(a) Deficit Budget
(b) Balanced Budget
(c) Surplus Budget
(d) None of these

Question. Borrowings in government budget are______
(a) revenue deficit
(b) fiscal deficit
(c) primary deficit
(d) deficit in taxes

Question. What is the duration of the Union Budget?
(a) Annual
(b) Half-yearly
(c) Two years
(d) Five Years

Question. Disinvestment by government 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

Question. If the primary deficit is ₹3,000 and interest payment is ₹500, the fiscal deficit is
(a) ₹3,500
(b) ₹4,000
(c) ₹4,100
(d) ₹4,200

Question. If the government establishes a new university, this expenditure incurred in the government budget will be a type of _____ expenditure.
(a) revenue
(b) capital
(c) non-planned
(d) None of these

Question. Assertion (a): The government has allocated extra money in Budget 2021 to provide safe drinking water facilities and sanitation to the people.
Reason (R): The government does it because sanitation and providing drinking water are public goods.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): Revenue deficit is a part of fiscal deficit.
Reason (R): Fiscal deficit = Revenue deficit – capital expenditure + Non debt creating capital receipts.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): Expenditure on Ujjwala Yojana launched by the Government is an example of revenue expenditure.
Reason (R): It is the expenditure that neither created assets nor reduced liabilities of the Government.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): Tax is the main source of government revenue that is used to provide subsidies to the poor at concessional prices, therefore those who pay tax should not use government services. 
Reason (R): Public goods are non-exclusive and non-rival in consumption.
Alternatives:
(a) Both Assertion(a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

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