BUDGET MCQ
(A) Budget
(B) Income estimates
(C) Account
(D) Expenditure
Answer: (A) Budget
Question. Which of the following is an example of direct tax?
(A) VAT
(B) Excise duty
(C) Entertainment tax
(D) Wealth tax
Answer: (D) Wealth tax
Question. What is the period of a fiscal year?
(A) 1 April to 31 March
(B) 1 January to 31 December
(C) 1 March to 28 February
(D) None of these
Answer: (A) 1 April to 31 March
Question. When government spends more than it collects by way of revenue, it incurs ______
(A) Budget surplus
(B) Budget deficit
(C) Capital expenditure
(D) Revenue expenditure
Answer: (B) Budget deficit
Question. The fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding ______
(A) Interest
(B) Taxes
(C) Spending
(D) Borrowings
Answer: (D) Borrowings
Question. Which of the following is the component of a budget?
(A) Fiscal budget
(B) Capital budget
(C) Both of these
(D) None of these
Answer: (C) Both of these
Question. 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
Answer: (B) Fiscal Budget
Question. How many types of revenue receipts are there?
(A) 2
(B) 3
(C) 4
(D) 6
Answer: (A) 2
Question. The amount collected by the government as taxes and duties is known as _______
(A) Capital receipts
(B) Tax revenue receipts
(C) Non-tax revenue receipts
(D) All of these
Answer: (B) Tax revenue receipts
Question. 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
Answer: (C) Non-tax revenue receipts
Question. Borrowing in the government budget is:
(A) Revenue deficit
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes
Answer: (B) Fiscal deficit
Question. The non-tax revenue in the following is:
(A) Export duty
(B) Import duty
(C) Dividends
(D) Excise
Answer: (C) Dividends
Question. The 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
Answer: (D) Fiscal deficit is equal to interest payment
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) The buyers of goods
(D) The income earners
Answer: (D) The income earners
Question. Financial Year in India is:
(a) April I to March 31
(b) January 1 to December 31
(c) October 1 to September 30
(d) None of the above
Answer: (a) April I to March 31
Question. Which objectives government attempts to obtain by Budget
(a) To Promote Economic Development
(b) Balanced Regional Development
(c) Redistribution of Income and Wealth
(d) All the above
Answer: (d) All the above
Question. Which is a component of Budget?
(a) Budget Receipts
(b) Budget Expenditure
(c) Both (a) and (b)
(d) None of the above
Answer: (c) Both (a) and (b)
Question. Which is a component of the Budget Receipt?
(a) Revenue Receipt
(b) Capital Receipt
(c) Both (a) and (b)
(d) None of the above
Answer: (c) Both (a) and (b)
Question. Tax revenue of the Government includes :
(a) Income Tax
(b) Corporate Tax
(c) Excise Duty
(d) All of these
Answer: (d) All of these
Question. Which is included in the Direct Tax?
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) Excise Duty
Answer: (c) Both (a) and (b)
Question. Which is included in Indirect Tax?
(a) Excise Duty
(b) Sales Tax
(c) Both (a) and (b)
(d) Wealth Tax
Answer: (c) Both (a) and (b)
Question. The expenditures which do not create assets for the government is called :
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Both (a) and (b)
(d) None of the above
Answer: (a) Revenue Expenditure
Question. Direct tax is :
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) None of these
Answer: (c) Both (a) and (b)
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
Answer: (b) Finance Ministry of Government of India
Question. Capital budget consist of:
(a) Revenue Receipts and Revenue Expenditure
(b) Capital Receipts and Capital Expenditure
(c) Direct and Indirect Tax
(d) None of these
Answer: (b) Capital Receipts and Capital Expenditure
Question. Which of the following is an indirect tax?
(a) Excise Duty
(b) Sales Tax
(c) Custom Duty
(d) All of these
Answer: (d) All of these
Question. Which type of expenditure is made in bridge construction?
(a) Capital Expenditure
(b) Revenue Expenditure
(c) Both (a) and (b)
(d) None of the above
Answer: (a) Capital Expenditure
Question. Which of the following budget is suitable for developing economies?
(a) Deficit Budget
(b) Balanced Budget
(c) Surplus Budget
(d) None of these
Answer: (a) Deficit Budget
Question. What is the duration of a Budget?
(a) Annual
(b) Two Years
(c) Five Years
(d) Ten Years
Answer: (a) Annual
Question. Which of the following is included in fiscal policy?
(a) Public Expenditure
(b) Tax
(c) Public Debt
(d) All of these
Answer: (d) All of these
Question. Which of the following is the capital expenditure of the government?
(a) Interest Payment
(b) Purchase of House
(c) Expenses on Machinery
(d) All of the above
Answer: (a) Interest Payment
Question. The budget may include:
(a) Revenue Deficit
(b) Fiscal Deficit
(c) Primary Deficit
(d) All of these
Answer: (d) All of these
Question. Which of the following statement is true?
(a) Fiscal deficit is the difference between total expenditure and total receipts
(b) Primary deficit is the difference between total receipt and interest payments
(c) Fiscal deficit is the sum of primary deficit and interest payment
(d) All of these
Answer: (c) Fiscal deficit is the sum of primary deficit and interest payment
Question. Budget:
(a) is a description of income-expenditure of government
(b) is a document of the economic policy of the government
(c) is a description of non-programs of the government
(d) All of these
Answer: (d) All of these
Question. 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)
Answer: (d) Only (b) and (c)
Question. Which is included in indirect tax?
(a) Income tax
(b) Wealth tax
(c) Excise Duty
(d) Gift tax
Answer: (c) Excise Duty
Question. Which one of the following is a pair of direct tax?
(a) Excise duty and Wealth Tax
(b) Service Tax and Income Tax
(c) Excise Duty and Service Tax
(d) Wealth Tax and Income Tax
Answer: (d) Wealth Tax and Income Tax
Question. Which of the following is not a revenue receipt?
(a) Recovery of Loans
(b) Foreign Grants
(c) Profits of Public Enterprise
(d) Wealth Tax
Answer: (a) Recovery of Loans
Question. Which of the following is a correct measure of the primary deficit?
(a) Fiscal deficit minus revenue deficit
(b) Revenue deficit minus interest payments
(c) Fiscal deficit minus interest payments
(d) Capital expenditure minus revenue expenditure
Answer: (c) Fiscal deficit minus interest payments
Question. The duration of the Government budget is:
(a) 5 years
(b) 2 years
(c) 1 year
(d) 10 years
Answer: (c) 1 year
Question. Budget is presented in the Parliament by:
(a) Prime Minister
(b) Home Minister
(c) Finance Minister
(d) Defence Minister
Answer: (c) Finance Minister
Question. Budget speech in Lok Sabha is given by:
(a) President
(b) Prime Minister
(c) Finance Minister
(d) Home Minister
Answer: (c) Finance Minister
Question. Professional tax is imposed by:
(a) Central Government
(b) State Government
(c) Municipal Corporation
(d) Gram Panchayat
Answer: (b) State Government
Question. From the following which is included in the direct tax:
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) Excise Tax
Answer: (c) Both (a) and (b)
Question. Who issues 1 rupee note in India:
(a) Reserve Bank of India
(b) Finance Ministry of India
(c) State Bank of India
(d) None of these
Answer: (b) Finance Ministry of India
Question. Which of the following statements is true?
(a) Expenditure on Ujjwala Yojana launched by the government is an example of
capital expenditure
(b) Expenditure on Ujjwala Yojana launched by the government is an example
of Revenue Expenditure
(c) Expenditure on Ujjwala Yojana launched by the Government is an example of
Deferred Revenue Expenditure
(d) None of the Statements are correct
Answer: (b)Expenditure on Ujjwala Yojana does not result in creation of an assets nor decrease the liabilities. Thus it is an revenue expenditure
Question. Which of the following statements is true?
(a) Government Borrowings from the World Bank is a Revenue Receipts.
(b)Higher Fiscal deficit is the result of a higher revenue deficit.
(c) The loans taken by the government represent a situation of fiscal deficit.
(d) The excess of capital receipts over the revenue receipts is called
Revenue deficit.
Answer: (c) Fiscal Deficit = Borrowing
Question. Identify which of the following statements is true:-
(a) The difference between planned revenue expenditure and planned
revenue receipts are called fiscal deficit
(b) The difference between total planned expenditure and total planned receipts
is called a fiscal deficit.
(c) The difference between total planned receipts and interest payment is
called a primary deficit.
(d) The sum of primary deficit and interest payment is called a fiscal deficit.
Answer: (d) Primary Deficit = Fiscal Deficit – Interest Payments
Question. Borrowing in government budget is:-
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary Deficit
(d) Deficit in taxes
Answer: (b) Fiscal deficit
Question. Which of the following is not a revenue receipt?
(a) Recovery of Loans
(b) Foreign Grants
(c) Profits from Public Enterprises
(d) Wealth Tax
Answer: (a) Recovery of loans reduces the assets of the government. Thus it is a capital Receipt.
Question. The Non-tax revenue in the following is:-
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise
Answer: (c) dividends is received by the government if it investment in shares
Question. Direct tax is called direct because it is collected directly from:-
(a) The producers on goods produced
(b) The seller on goods sold
(c) The buyers of goods
(d) The income earners
Answer: (d) Direct are the tax, The burden and the liability of which lie on the same person.
Question. Which one of the following is a combination of direct taxes:-
(a) Excise duty and wealth tax
(b) Service tax and Income tax
(c) Excise duty and Service tax
(d) Wealth tax and Income tax
Answer: (d) Wealth and income tax burden and the liability both lie on same person.
Question. Primary deficit equals:-
(a) Borrowings
(b) Interest payments
(c) Borrowings less interest payments
(d) Borrowings and interest payments both
Answer: (c) Borrowings less interest payments
Question. The primary deficit in a government budget is:-
(a) Revenue expenditure – Revenue Receipts
(b) Total Expenditure – Total Receipts
(c) Revenue deficit – Interest payments
(d) Fiscal deficit – Interest Payments
Answer: (d) Primary deficit is the difference between the fiscal deficit and the interest payments on accumulated borrowings
Question. Fiscal Deficit equals:-
(a) Interest payments
(b) Borrowings
(c) Interest payments less borrowing
(d) Borrowings less interest payments
Answer: (b)Fiscal deficit shows the total borrowing requirement of the government during fiscal year.
c Which of the following is a source of capital receipt?
(a) Foreign donations
(b) Dividends
(c) Dis-investment
(d) Indirect taxes
Answer: (c) Disinvestment decreases the assets of the government hence it is a capital receipt
Question. Which of the following sources of receipts in government budget increases its liabilities:-
(a) Direct taxes
(b) Recovery of loans
(c) Borrowings
(d) Dividend from public sector undertakings
Answer: (c) raising loan by the government increases its liabilities.
Question. Which of the following is a direct tax?
(a) Corporation tax
(b) Entertainment tax
(c) Excise duty
(d) Service tax
Answer: (a) corporation tax are charged by company. As company is an artifical individual. The tax burden and the liabilities both on the same person that is company
Question. Fiscal deficit equals:-
(a) Primary deficit minus interest payments
(b) Primary deficit plus interest payments
(c) Total budget expenditure minus total budget receipts
(d) None of the above.
Answer: (b) Primary deficit = Fiscal Deficit – Interest Payments
Question. Primary deficit is borrowing requirement of government for making:
(a) Interest Payments
(b) Other than interest payments
(c) All types of Payments
(d) Some specific payments
Answer: (b)Primary deficit = Borrowing – Interest Payments
Question. Which one of the following is not a capital expenditure?
(a) Loans advanced by World Bank
(b) Construction of School buildings
(c) Repayment of loans
(d) Purchase of Metro Coaches from Japan
Answer: (a)Capital expenditure either increases assets or reduces the liabilities. But loans advanced by world bank increases the liabilities. Thus it is not the capital expenditure
Question. If government borrowings = ₹ 800 crore and interest payments = ₹ 155 crores, then find fiscal deficit and primary deficit.
(a) Fiscal deficit = ₹ 155 crore and Primary deficit = ₹ 800 crore
(b) Fiscal Deficit = ₹ 800 crore and Primary deficit = ₹ 155 crore
(c) Fiscal deficit = ₹ 155 crore and Primary Deficit = ₹ 645 crore
(d) Fiscal Deficit = ₹ 800 crore and Primary Deficit = ₹ 645 crore
Answer: (d) Fiscal deficit = Borrowings, Primary Deficit = Borrwoings – Interest payments
Question. If the fiscal deficit is ₹ 550 crore and interest payment is ₹ 200 crore, then primary deficit.
(a) ₹ 200 crore
(b) ₹ 550 crore
(c) ₹ 765 crore
(d) ₹ 350 crore
Answer: (d) Primary Deficit = Fiscal Deficit – Interest Payments
Question. The government starts selling its securities to the private sector. What is the process called?
(a) Open market operation
(b) Disinvestment
(c) Monetary expansion
(d) All of the above
Answer: (b) When government sells its government own company’s share to private owners. This process is called disinvestment.
Question. From the following, which is not an implication of fiscal deficit?
(a) It determine total borrowing requirements to the government
(b) It increases the liability of the government
(c) It increase foreign dependence
(d) Repayment of the loan together with interest further decreases the fiscal
deficit
Answer: (d)repayment of the loan is the solution of the fiscal deficit not the implication.
Question. Zero primary deficit means that the government has to resort to borrowings only to make
(a) Interest Payment
(b) fiscal payment
(c) Capital payment
(d) Primary payment
Answer: (a) Primary deficit = Borrowing – Interest Payments. When borrowing are just equal to pay the interest on accumulated loans, the primary deficit is zero.
Question. Primary Deficit = Fiscal Deficit – ______________
(a) Borrowings
(b) Subsidies
(c) Interset Payments
(d) Transfer Payments
Answer: (c)Primary Deficit = Fiscal Deficit (Borrowings) – Interest Payments
Question. Which of the following budget is more suitable for developing economies like India?
a) Deficit budget
b) Balanced Budget
c) Surplus Budget
d) None of these
Answer: (a)developing countries incur more expenses on infrastructure and on administration for future growth. Thus total expenditure of the government are always more than the receipts.
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
Answer: (d) All of the above
Question. Which of the following does not form the part of capital receipts of the Union Government?
(a) Non-Tax Revenue
(b) Loan recoveries
(c) Net Market borrowings
(d) None of the above
Answer: (a) Non-Tax Revenue
Question. The expenditure incurred for smooth functioning of government departments and for day to day expenses of the government is called……..
(a) Capital expenditure
(b) Non-plan expenditure
(c) revenue expenditure
(d) All of the above
Answer: (c) The government day to day expenses are called revenue expenditure.
Question. Which of the following is capital expenditures
(a) Subsidies
(b) Interest Payments
(c) Purchase of shares
(d) Defence purchases
Answer: (c) Capital expendiutres results in either increase of assets or reduce of liabilities
Question. Goods and Service Tax (GST) is an example of________under government receipts
(a) Indirect tax
(b) direct tax
(c) Non-tex revenue
(d) income tax
Answer: (a) GST is the Indirect tax as its burden and liabilites lie on different person
Question. Following are the impacts of the government budget on the economy excluding
(a) brings better allocation of resources
(b) implement government welfare programs
(c) brings aggregate fiscal indiscipline level
(d) better access to public goods
Answer: (c) brings aggregate fiscal indiscipline level
Question. Which of the following is the correct measure of primary deficit:-
(a) Fiscal deficit minus revenue deficit
(b) Revenue deficit minus interest payments
(c) Fiscal deficit minus interest payments
(d) Capital expenditure minus revenue expenditure
Answer: (c) Fiscal deficit minus interest payments.
Question. Which of the following statements is true?
(a) Fiscal deficit is the difference between total expenditure and total receipts
(b) Primary deficit is the difference between total receipt and interest payments
(c) Fiscal deficit is the sum of primary deficit and interest payments
(d) Primary deficit is the difference between revenue deficit and interest payments
Answer: (c) Fiscal deficit is the sum of primary deficit and interest payments
Question. Borrowings in government budget are______
a) revenue deficit
b) fiscal deficit
c) primary deficit
d) deficit in taxes
Answer: (b) fiscal deficit
Fill in the blanks
Question . A deficit budget is that in which total expenditure is ________ total receipts.
Answer: greater than
Question. Revenue deficit is that in which revenue receipts are ________ revenue expenditure.
Answer: less than
Question. _______ tax is that in which the final burden of the tax fall on the person who pays it.
Answer: Direct
Question. Tax is a legally compulsory payment imposed by the _______ on income and property of persons and companies.
Answer: Government
Question. Recovery of loan is treated as capital receipt because it leads to __________
Answer: reduction of assets
Question. Primary Deficit = Fiscal Deficit minus __________
Answer: Interest on Debt
Question. ________ are levied on goods and services.
Answer: Indirect taxes
Question. _________ does not have any impact on the asset-liability status of the government.
Answer: Revenue budget
Question. The government can influence the allocation of resources through the implementation of appropriate _________
Answer: fiscal policy
Question. __________ is a document containing income and expenditure of the government.
Answer: Budget
Question. Income tax is _________ tax.
Answer: Direct
Question. _________ tax is levied on the value of the goods.
Answer: Advalorem
Question. Service tax is levied by the ________
Answer: Center
Question. _________ budget is considered good for the country.
Answer: Deficit
Question. Finance bill contains _________ proposals.
Answer: Tax
Question. Government budget is presented on the last day of _________
Answer: February
State true or false
Question. Public goods are collectively consumed.
Answer: True
Question. There is a feasible way of excluding anyone from enjoying the benefits of public goods.
Answer: False
Question. The three functions of allocation, redistribution, and stabilization are operated through the expenditure and receipts of the government.
Answer: True
Question. The deficit decreases in a recession and increases in a boom, even without any change in fiscal policy.
Answer: False
Question. Indirect taxes are not convenient to realise.
Answer: False
Question. Payment of salaries to the government employees is a capital payment.
Answer: False
Question. Expenditure made on the establishment of the metro rail line in Delhi is a capital expenditure.
Answer: True
Question. Public borrowing is a capital receipt.
Answer: True
Question. Recovery of loan is a revenue receipt
Answer: False
Question. Service tax is a direct tax.
Answer: False
Question. Grants by the government are treated as revenue expenditure.
Answer: True
Question. Excess of capital expenditure over capital receipt is called revenue deficit.
Answer: False
Question. A deficit budget is not considered a good budget.
Answer: False
Question. Electricity tax is levied by the State Government.
Answer: True
Question. The budget speech is given by the Finance Minister
Answer: True
Question. Central excise duty is a direct tax
Answer: False
Question. The interest payment is a planned item.
Answer: False
Question. During deflation surplus budget is made
Answer: True
Question. The rail budget is generally not included in the annual budget.
Answer: True
Match the following
Question
| ‘A’ | ‘B’ |
| 1. Income and expenditure of the government | (a) 31 March |
| 2. First of all finance bill is presented in the | (b) Budget |
| 3. Budget is presented on | (c) Details about income and expenditure |
| 4. Aim or Objective of the budget | (d) Lok sabha |
| 5. Main feature of the budget | (e) Economic development. |
Question
| Column-I | Column-II |
| 1. Surplus budget | (A) Revenue receipts > Revenue expenditure |
| 2. Deficit budget | (B) Fiscal deficit – interest payments |
| 3. Revenue deficit | (C) Govt. Expenditure < Govt. Receipts |
| 4. Fiscal deficit | (D) Income tax, corporate profit tax |
| 5. Primary deficit | (E) Expenditure on roads and health |
| 6. Examples of direct tax | (F) Govt. Expenditure > Govt. Receipts |
| 7. Examples of indirect tax | (G) Loans granted to state governments |
| 8. Examples of development expenditure | (H) Total expenditure > total receipts |
| 9. Examples of non-development expenditure | (I) Sale tax, excise duty |
| 10. Examples of capital expenditure | (J) Sales tax, Income tax |
| 11. Sources of tax revenue | (K) Expenditure on administration and defence |
MCQ
1. Primary deficit in a government budget will be zero, when ______
- Revenue deficit is zero
- Net interest payments are zero
- Fiscal deficit is zero
- Fiscal deficit is equal to interest payment
2. Which one of the following is not a capital expenditure?
- Loans advanced by World Bank
- Construction of school buildings
- Repayment of loans
- Purchase of Metro Coaches from Japan
3. Primary deficit is borrowing requirements of government for making
- Interest payments.
- Other than interest payments.
- All types of payments.
- Some specific payments.
4. Fiscal deficit equals
- Primary deficit minus interest payments.
- Primary deficit plus interest payments.
- Total budget expenditure minus total budget receipts.
- None of the above.
5. Identify the correctly matched pair.
| COLUMN A | COLUMN B |
| (i) Fiscal Deficit | (a) Other than interest payments |
| (ii) Primary Deficit | (b) Borrowings less interest payments |
| (iii) Revenue Deficit | (c) Borrowings |
| (iv) Tax Deficit | (d) Borrowings in government budget |
- (i) – (a)
- (ii) – (b)
- (iii) – (c)
- (iv) – (d)
6. Which of the following sources of receipts in the government budget increases its liabilities?
- Direct taxes
- Recovery of loans
- Borrowings
- Dividend from public sector undertakings
7. Identify the correctly matched pair.
| COLUMN A | COLUMN B |
| (i) Excise Duty | (a) Capital reciepts |
| (ii) Income tax | (b) Direct tax |
| (iii) Earning from PSU | (c) Indirect tax |
| (iv) Old age pensions | (d) Non-tax revenue reciepts |
- (i) – (a)
- (ii) – (b)
- (iii) – (c)
- (iv) – (d)
8. Fiscal Deficit equals
- Interest payments
- Borrowings
- Interest payments less borrowing
- Borrowings less interest payments
9. Primary deficit in a government budget is
- Revenue expenditure – Revenue receipts
- Total expenditure – Total receipts
- Revenue deficit – Interest payments
- Fiscal deficit – Interest payments.
10. Identify the correctly matched pair.
| COLUMN A | COLUMN B |
| (i) Revenue Expenditure | (a) Doesn’t cause any reduction in government liability |
| (ii) Capital Expenditure | (b) Which creates corresponding liability for the government |
| (iii) Revenue receipts | (c) Which causes reduction in assets of the government |
| (iv) Capital receipts | (d) Causes reduction in government liability |
- (i) – (a)
- (ii) – (b)
- (iii) – (c)
- (iv) – (d)
11. Which one of the following is a combination of direct taxes?
- Excise duty and Wealth tax
- Service tax and Income tax
- Excise duty and Service tax
- Wealth tax and Income tax
12. Match the following and choose the correct option.
| COLUMN A | COLUMN B |
| (i) GST | (a) Indirect tax |
| (ii) Income tax | (b) Burden can be shifted |
| (iii) Fine | (c) Direct tax |
| (iv) Tax reciepts | (d) Capital receipt |
- (i) – (a)
- (ii) – (b)
- (iii) – (c)
- (iv) – (d)
13. The non-tax revenue in the following is
- Export duty
- Import duty
- Dividends
- Exercise
14. Match the following and choose the correct option.
| COLUMN A | COLUMN B |
| (i) Balanced Budget | (a) Total anticipated expenditure < total anticipated revenue |
| (ii) Surplus Budget | (b) Total expenditure > Total revenue |
| (iii) Capital Budget | (c) Capital receipts = capital expenditure |
| (iv) Deficit Budget | (d) Total expenditure = total revenue |
- (i) – a
- (ii) – b
- (iii) – c
- (iv) – d
15. Which of the following statements is true?
- Expenditure on Ujjwala Yojana launched by the Government is an example of capital expenditure.
- Expenditure on Ujjwala Yojana launched by the Government is an example of Revenue Expenditure.
- Expenditure on Ujjwala Yojana launched by the Government is an example of Deferred Revenue Expenditure.
- None of the statements are correct
16. Borrowing in government budget is
- Revenue deficit
- Fiscal deficit
- Primary deficit
- Deficit in taxes
17. Identify which of the following statements is true.
- The difference between planned revenue expenditure and planned revenue receipts is called fiscal deficit.
- The difference between total planned expenditure and total planned receipts is called fiscal deficit.
- The difference between total planned receipts and interest payment is called primary deficit.
- The sum of primary deficit and interest payment is called fiscal deficit.
18. Which of the following statements is true?
- Government Borrowings from the World Bank is a Revenue Receipt.
- Higher fiscal deficit is the result of higher revenue deficit.
- The loans taken by the government represent a situation of fiscal deficit.
- The excess of capital receipts over the revenue receipts is called Revenue deficit.
19. Which of the following is a direct tax?
- Corporation tax
- Entertainment tax
- Excise duty
- Service tax
20. Which of the following is a source of capital receipt?
- Foreign donations
- Dividends
- Dis-investment
- Indirect taxes
21. Direct tax is called direct because it is collected directly from
- the producers of goods produced
- the sellers on goods sold
- the buyers of goods
- the income earners
22. Which of the following is not a revenue receipt?
- Recovery of Loans
- Foreign Grants
- Profits of Public Enterprises
- Wealth Tax
23. Purchase of shares is related to
- revenue
- revenue expenditure
- capital receipt
- capital expenditure
24. Revenue budget includes
- revenue receipts of the government
- revenue expenditure of the government
- capital receipts of the government
- both 1 and 2
25. The focus of government budget is to
- maximise fiscal deficit
- minimise fiscal deficit
- maximise expenditure
- maximise revenue
MCQ Answers
1. (4)
Primary deficit indicates borrowing requirements of the government to meet fiscal deficit net of interest payments.
2. (1)
Loan advanced by World Bank is a capital receipt as it raises liability or reduces assets.
3. (2)
Primary deficit indicates borrowing requirements of the govt. to m t fiscal deficit net of interest payments.
4. (2)
Fiscal Deficit refers to the excess of total expenditure over total receipts excluding borrowings.
5. (2)
Primary deficit indicates borrowing requirements of the govt. to meet fiscal deficit net of interest payments.
6. (3)
Borrowings is a capital receipt as it creates a liability.
7. (2)
A direct tax is a tax, the burden of which is on that very person who is liable to pay it to the government.
8. (2)
Primary deficit indicates borrowing requirements of the government to meet fiscal deficit net of interest payments.
9. (4)
10. (1)
Revenue receipts do not create any liability for the government. For example, taxes received by the government, unlike borrowings, do not create any liabilities for it.
11. (4)
In case of direct tax, the burden of tax and the liability to pay it falls on the same person.
12. (1)
Indirect fax in tax is a tax goods and services.
13. (3)
Non-Tax Revenue is the recurring income earned by the government from sources other than taxes.
14. (3)
Capital Budget is the statement of estimated capital receipts and estimated capital expenditure during a fiscal year.
15. (1)
16. (2)
Fiscal deficit Is defined as excess of total budget expenditure over total budget receipts excluding borrowings during a fiscal year.
17. (4)
18. (3)
Fiscal deficit is defined as the amount of borrowing the government has to resort to meet its expenses.
19. (3)
In case of direct tax, the burden of tax and the liability to pay it falls on the same person.
20. (3)
Disinvestment is a capital receipt as it reduces assets.
21. (4)
In case of direct tax, the burden of tax and the liability to pay it falls on the same person. The liability to pay the tax cannot be shifted on to another person.
22. (1)
Recovery of loan is a capital receipt because it reduces assets of the government.
23. (4)
Purchase of shares is an investment for the government and increases assets.
24. (4)
Revenue budget is the statement of estimated revenue receipts and estimated revenue expenditure during a fiscal year.
25. (2)
Assertion and Reasoning MCQs
Code
- Both assertion and reason are true and reason is the correct explanation of assertion.
- Both assertion and reason are true but reason is not the correct explanation of assertion.
- Assertion is true but reason is false.
- Assertion is false but reason is true.
1. Assertion Revenue deficit includes capital receipts and capital expenditure.
Reason Revenue deficit is related to revenue expenditure and revenue receipts of the government.
2. Assertion Fiscal deficit is the difference between primary deficit and interest payment.
Reason Fiscal deficit is the sum total of primary deficit and interest payment.
3. Assertion Fiscal deficit is measured in terms of borrowings.
Reason External borrowings increase the Fiscal deficit.
4. Assertion Budget shows monetary policy of the government.
Reason Policy adopted by the Central Bank of an economy in the direction of credit control or money supply is known as Monetary policy.
Assertion-Reasoning Based MCQ Answers
1. (4)
Revenue Deficit refers to the excess of total revenue expenditure over total revenue receipts. It means that government will not be able to meet its revenue expenditure from its revenue receipts.
2. (4)
Fiscal Deficit refers to the excess of total expenditure over total receipts excluding borrowings. It indicates borrowing requirements of the government.
3. (2)
Fiscal Deficit refers to the excess of total expenditure over total receipts excluding borrowings. It indicates borrowing requirements of the government.
4. (4)
Budget shows fiscal policy of the government for the year to come.
Case-Study Based MCQ
1. Read the following passage and answer accordingly.
MUMBAI: Investors were relieved as the finance minister Nirmala Sitharaman avoided an increase in the long-term capital gains tax on equity investments and securities transaction tax in the Union Budget for 2021-22 announced today.
Heading into the Budget, most investors were concerned that the government may look at increasing the long-term capital gains tax or the securities transaction tax in order to boost its revenues, especially as the stock market has witnessed a breakneck rally since the beginning of April.
In her Budget speech in July 2019, the finance minister had reintroduced the long-term capital gains tax after 15 years. Currently, individuals who make capital gains of more than lakh on their equity investment after a holding period of more than one year have to pay a tax of 10 per cent on the capital gains.
However, the capital gains tax for individuals in the highest bracket of earnings comes around 15 % inclusive of a cess.
Money managers had said that the government needed to bring out an equity friendly budget, implying no changes in taxations related to the stock market, in order to ensure that its plans went smoothly in the next fiscal year.
(i) What type of tax is the Capital Gains Tax?
(a) Direct Tax
(b) Indirect Tax
(c) It is a cess
(d) It is a fine(ii) What is the reason for the government to increase taxes?
- (a) To extract money from the people
(b) To use the money for themselves
(c) To achieve the objective of equality in income distribution
(d) To get their salary(iii) Why didn’t the government say anything about the capital gains tax?(a) To stabilize the economic growth
(b) To help the economy for economic growth
(c) Rectify the losses that happened due to Covid-19
(d) All of the above(iv) The capital gains come in the highest bracket of earning comes around _______
(a) 10%
(b) 15%
(c) 20%
(d) None of the above2. Read the following passage and answer accordingly.
The Finance Minister Nirmala Sitharaman has proposed a sharp 34.5 % hike in capital expenditure to ₹ 5.54 lakh in financial year 2022 in order to push growth. The massive increase comes at a time when the country is looking to recover from the Covid pandemic, as rising government spending is key to bringing the economy back on track.
The government will also provide an additional ₹ 2 lakh crore to states for capital expenditure over and above its own commitment. “We will also work out a specific mechanism to nudge states to spend more of their Budget on creation of infrastructure,” Ms. Sitharaman said.
The finance minister said that the government will launch a national asset monetisation pipeline which includes the sale of oil and gas pipelines, power transmission lines and operation of toll roads under the National Highway Authority of India.
This year’s budget, according to the government, rests on six pillars: health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and research and development, and “minimum government, maximum governance,” the finance minister had asserted. And capital expenditure is an important component that drives the growth
(i) Why has the finance minister hiked the capital expenditure?
(a) To recover from the Covid pandemic
(b) bring the economy back on track
(c) both (a) and (b)
(d) neither (a) nor (b)(ii) _________ is an important component that driven the growth
(a) Capital Expenditure
(b) Revenue Expenditure
(c) Capital Receipts
(d) Revenue Receipts(iii) Which objective of the government budget does the increase in capital expenditure serve?
(a) Encouragement of economic growth
(b) Stability in the economy
(c) Generation of employment
(d) All of the above - (iv) What problem can the increase in this Capital Expenditure create?(a) Fiscal Deficit
(b) Revenue Deficit
(c) Primary Deficit
(d) Budgetary Deficit3. Read the following passage and answer accordingly.
NEW DELHI: Finance Minister Nirmala Sitharaman on Monday announced plans to sell stake in LIC as part of her disinvestment plans for F/Y 22. In her Budget speech, the FM said her government will complete divestment of BPCL, CONCOR and SCI in F/Y 22.
She said that her government will privatise two public sector banks (PSBs) and one general insurance company as well. “LIC IPO may see the light of day soon,” said Jiger Saiya, Partner and Leader – Tax & Regulatory Services at BDO India.
Earlier, in an interview with ET LIC Chairman M R Kumar had said the IPO is very much likely “The point is that it is going to be big and we want to get the valuations right,” he had said adding that the listing of an insurance company requires determining the embedded value of the business.
LIC has started the process and will soon announce the software, which will assist it determine the right valuation.
“We have floated an RFP for the actuarial firm that will undertake the exercise. This calculation will take some time. Once this process is done, we will be ready,” Kumar said on January 11.
Last week, a Reuters report quoting sources suggested that the government was looking to sell 10-15% in the country’s biggest insurer to improve public finances.
To facilitate the sale of the LIC stake, the government will need Parliament approval to amend the LIC.
As part of its divestment drive, four CPSEs — HAL, SAIL, Bharat Dynamics and IRCPC —have come out with offers for sale (OFSs) this financial year. They garnered crore to the exchequer In addition, IPOs of IRFC and Mazagon Dock Shipbuilders together fetched crore.
Also, this year, the government sold shares worth about crore in private companies, in which it holds stakes through SUUII
Four state-owned companies, NTPC, RITES, NMDC and KOCL, completed share buybacks, adding crore to the exchequer.
The government is also looking to sell its entire 26.12 per cent stake in Tau Communications (TCL), erstwhile VSNL, through an OFS and strategic sale this financial year The process of privatisation of Air India, BPCL, Pawan Hans, BEML, Shipping Corp, Neelachal Ispat Nigam Limited and Ferro Scrap Nigam Limited (FSNL) is currently underway.
(i) The government will privatise________ Public Sector Banks
(a) One
(b) Two
(c) Three
(d) None of the above(ii) What is the main reason for this disinvestment?
(a) To reduce the fiscal deficit
(b) To revive the economy
(c) To create monopoly of industrialists
(d) To earn revenue(iii) According to Reuters, why is the government looking to sell the country’s insurer?
(a) To reduce revenue deficit
(b) To reduce fiscal deficit
(c) To improve public finances
(d) To get money other than taxes.(iv) What other things can the government do to improve the deficit with respect to the current Covid situation?
(a) Borrowing from public
(b) Lowering government expenditure
(c) Raising government revenue
(d) None of the aboveCase-Study Based MCQ Answers
1.
(i) (a)
A capital gains tax is a type of tax applied to the profits earned on the sale of an asset
(ii) (c)
Government can collect from the rich and exempt the poor from income tax. Money so collected can be spent on providing free service to the poor. It will reduce disposable income of the rich and increase that of the poor.
(iii) (b)
(iv) (b)
2.
(i) (c)
(ii) (a)
Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.
(iii) (4)
(iv) (1)
Fiscal deficit takes place either due to revenue deficit or a major hike in capital expenditure.
3.
(i) (b)
Finance Minister Nirmala Sitharaman on Monday announced that her government will privatise two public sector banks (PSBs) and one general insurance company as well.
(ii) (a)
Dis-investment reduces the financial burden of the government.
(iii) (c)
(iv) (4)