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Questions and Answers
The government intervention to expand or reduce demand constitutes the stabilisation ______.
The government intervention to expand or reduce demand constitutes the stabilisation ______.
function
Revenue receipts are those receipts that do not lead to a claim on the ______.
Revenue receipts are those receipts that do not lead to a claim on the ______.
government
Tax revenues are divided into direct taxes and ______ taxes.
Tax revenues are divided into direct taxes and ______ taxes.
indirect
Examples of direct taxes include personal income tax and ______ tax.
Examples of direct taxes include personal income tax and ______ tax.
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Excise taxes are taxes levied on goods produced within the ______.
Excise taxes are taxes levied on goods produced within the ______.
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Necessities of life are either exempted from excise taxes or taxed at ______ rates.
Necessities of life are either exempted from excise taxes or taxed at ______ rates.
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Non-tax revenue mainly consists of interest receipts on loans and ______ on investments.
Non-tax revenue mainly consists of interest receipts on loans and ______ on investments.
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Capital receipts involve money received by the government from loans or from the sale of its ______.
Capital receipts involve money received by the government from loans or from the sale of its ______.
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A government incurs a budget ______ when it spends more than it collects in revenue.
A government incurs a budget ______ when it spends more than it collects in revenue.
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The revenue deficit refers to the excess of government’s revenue expenditure over revenue ______.
The revenue deficit refers to the excess of government’s revenue expenditure over revenue ______.
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In 2022–23, the revenue deficit was calculated as ______ percent of GDP.
In 2022–23, the revenue deficit was calculated as ______ percent of GDP.
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Total revenue receipts amounted to ______ percent of GDP in the 2022–23 budget.
Total revenue receipts amounted to ______ percent of GDP in the 2022–23 budget.
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Interest payments accounted for ______ percent of the government's revenue expenditure.
Interest payments accounted for ______ percent of the government's revenue expenditure.
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The total expenditure of the government for 2022–23 was ______ percent of GDP.
The total expenditure of the government for 2022–23 was ______ percent of GDP.
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Capital receipts in the budget are comprised of recovery of loans, other receipts, and borrowings and other ______.
Capital receipts in the budget are comprised of recovery of loans, other receipts, and borrowings and other ______.
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The fiscal deficit is calculated as total expenditure minus revenue receipts and ______.
The fiscal deficit is calculated as total expenditure minus revenue receipts and ______.
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The fiscal deficit will have to be financed through ______.
The fiscal deficit will have to be financed through ______.
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Gross fiscal deficit includes Net borrowing at home, Borrowing from RBI, and Borrowing from ______.
Gross fiscal deficit includes Net borrowing at home, Borrowing from RBI, and Borrowing from ______.
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Net borrowing at home includes borrowing from the public through debt instruments and indirectly from ______.
Net borrowing at home includes borrowing from the public through debt instruments and indirectly from ______.
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The gross fiscal deficit is a key variable in judging the financial health of the public sector and the ______ of the economy.
The gross fiscal deficit is a key variable in judging the financial health of the public sector and the ______ of the economy.
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Revenue deficit is a part of fiscal deficit, expressed as Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating ______.
Revenue deficit is a part of fiscal deficit, expressed as Fiscal Deficit = Revenue Deficit + Capital Expenditure - non-debt creating ______.
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A large share of revenue deficit in fiscal deficit indicates that a large part of borrowing is used to meet ______ expenditure needs.
A large share of revenue deficit in fiscal deficit indicates that a large part of borrowing is used to meet ______ expenditure needs.
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The primary deficit focuses on present fiscal imbalances and is calculated by subtracting net interest liabilities from the ______.
The primary deficit focuses on present fiscal imbalances and is calculated by subtracting net interest liabilities from the ______.
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Net interest liabilities consist of interest payments minus interest receipts by the government on net ______ lending.
Net interest liabilities consist of interest payments minus interest receipts by the government on net ______ lending.
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Under GST, the tax is discharged at every stage of ______ and the credit of tax paid at the previous stage is available for set off.
Under GST, the tax is discharged at every stage of ______ and the credit of tax paid at the previous stage is available for set off.
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It effectively is a tax on ______ addition at each stage of supply.
It effectively is a tax on ______ addition at each stage of supply.
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GST has replaced various types of taxes/cesses levied by the ______ and State/UT Governments.
GST has replaced various types of taxes/cesses levied by the ______ and State/UT Governments.
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Some major taxes that were levied by Centre include Central Excise Duty, Service Tax, and Central Sales ______.
Some major taxes that were levied by Centre include Central Excise Duty, Service Tax, and Central Sales ______.
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State Governments will continue to levy VAT on alcoholic liquor for ______ consumption.
State Governments will continue to levy VAT on alcoholic liquor for ______ consumption.
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There are ______ standard rates applied under GST: 0%, 3%, 5%, 12%, 18%, and 28%.
There are ______ standard rates applied under GST: 0%, 3%, 5%, 12%, 18%, and 28%.
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GST was rolled out during a special midnight session of the ______ on 30 June/1 July, 2017.
GST was rolled out during a special midnight session of the ______ on 30 June/1 July, 2017.
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The 101st Constitution Amendment Act introduced Article 246A empowering Parliament and Legislatures of States to make laws with respect to ______ tax.
The 101st Constitution Amendment Act introduced Article 246A empowering Parliament and Legislatures of States to make laws with respect to ______ tax.
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A cut in taxes increases disposable income (Y – T) at each level of _____
A cut in taxes increases disposable income (Y – T) at each level of _____
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This shifts the aggregate expenditure schedule upwards by a fraction c of the decrease in _____
This shifts the aggregate expenditure schedule upwards by a fraction c of the decrease in _____
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The tax multiplier can be calculated using the same method as for the government expenditure _____
The tax multiplier can be calculated using the same method as for the government expenditure _____
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A tax cut will cause an increase in _____ and output.
A tax cut will cause an increase in _____ and output.
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The tax multiplier is a _____ multiplier.
The tax multiplier is a _____ multiplier.
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The tax multiplier is smaller in absolute value compared to the government spending _____
The tax multiplier is smaller in absolute value compared to the government spending _____
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In equation (5.7), the change in output (∆Y*) is influenced by the change in _____ (∆T)
In equation (5.7), the change in output (∆Y*) is influenced by the change in _____ (∆T)
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The relationship in equation (5.8) describes how output (∆Y) relates to the change in _____ (∆T).
The relationship in equation (5.8) describes how output (∆Y) relates to the change in _____ (∆T).
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An increase in G by 100 increases output by ______.
An increase in G by 100 increases output by ______.
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A tax increase would reduce income by ______.
A tax increase would reduce income by ______.
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The equilibrium income refers to the final income arrived at after all rounds of the ______ have worked themselves out.
The equilibrium income refers to the final income arrived at after all rounds of the ______ have worked themselves out.
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The balanced budget multiplier is equal to ______.
The balanced budget multiplier is equal to ______.
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The increase in government spending raises income directly and then indirectly through the ______ chain.
The increase in government spending raises income directly and then indirectly through the ______ chain.
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The effect on income of a tax increase is given by ______.
The effect on income of a tax increase is given by ______.
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In the case of proportional taxes, the government collects a constant fraction, ______, of income.
In the case of proportional taxes, the government collects a constant fraction, ______, of income.
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From the equation ∆Y = ∆ G + c (∆Y – ∆T), we see that investment does not ______.
From the equation ∆Y = ∆ G + c (∆Y – ∆T), we see that investment does not ______.
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Study Notes
Government Budget and the Economy
- Government plays a crucial role in a mixed economy, influencing economic life through the budget.
- The government budget outlines estimated receipts and expenditures for a financial year (April 1st to March 31st).
- Revenue receipts (non-redeemable) include taxes and non-tax sources.
- Tax revenues are categorized as direct (personal income, corporation tax) and indirect (excise, customs, service tax).
- Non-tax revenue includes interest, dividends, and fees.
- Capital receipts create liabilities (loans) or decrease assets (selling of shares).
Objectives of Government Budget
- Allocation: Government provides goods and services (national defense, roads) not efficiently provided by the market. Public goods are non-rivalrous (consumption by one doesn't reduce it for others) and non-excludable (everyone can use it).
- Redistribution: The government redistributes income through taxes and transfers, aiming for a fairer distribution.
- Stabilization: Government intervention corrects income and employment fluctuations. This involves managing aggregate demand to maintain employment and control inflation.
Classification of Receipts and Expenditures
-
Revenue Receipts: Do not create a claim on the government.
- Tax revenues (direct and indirect).
- Non-tax revenues (interest, dividends, fees).
-
Capital Receipts: Create liability or reduce government assets.
- Borrowing.
- Sale of assets.
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Revenue Expenditure: Normal functioning expenses (salaries, pensions, interest payments).
-
Capital Expenditure: Creates assets or reduces liabilities (land, buildings, machinery).
- Further categorized into Plan and Non-Plan.
Balanced, Surplus, and Deficit Budget
- Balanced budget: Government spending equals revenue collection.
- Surplus budget: Revenue exceeds expenditure.
- Deficit budget: Expenditure exceeds revenue.
- Various measures capture government deficits (revenue deficit, fiscal deficit, primary deficit).
Other notes
- Fiscal policy impacts the economy.
- The 2005-06 Indian Budget included gender sensitivities in its allocations.
- The 2006-07 budget expanded on the 2005-06 statement.
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Description
This quiz explores the role of government budgets in a mixed economy, outlining the components of government receipts and expenditures. It examines how budgets impact economic life, allocation of public goods, and income redistribution strategies. Test your understanding of these fundamental concepts in economic governance.
