| Question | 6. Distinguish between: (a) Direct Tax and Indirect tax (b) Primary deficit and Revenue deficit |
| Class | Class 12 |
| Subject | Economics (Macroeconomics) |
| Category | Class 12 Economics Solutions Sandeep Garg |
Sandeep Garg Macroeconomics Class 12 Solutions Circular flow of Income – Long Questions – Q.6 Distinguish between: (a) Direct Tax and Indirect tax (b) Primary deficit and Revenue deficit.
Solution:
(a) Direct Tax and Indirect tax
| Basis | Direct Taxes | Indirect Taxes |
| Levy | Direct taxes are levied on persons and corporates | Indirect taxes are levied on goods and services. |
| Burden to pay | Burden to pay cannot be shifted. | Burden to pay can be shifted. |
| Reach | They have limited reach as it does not cover all sections of society.
For example, not everyone is supposed to pay income tax. |
They have wide reach and cover all sections of society.
For example, everyone is supposed to pay GST on purchase of goods and services. |
(b) Primary deficit and Revenue deficit.
| Basis | Revenue Deficit | Primary Deficit |
| Meaning | Revenue deficit is a situation where governments revenue expenditure exceeds its revenue receipts. | Primary deficit refers to the excess of fiscal deficit over interest payments on borrowings by the government. |
| Implication | This implies government’s inability to meet its regular expenditure out of its regular income.
|
It indicates how much amount the government borrowing in order to just meet its expenses other than interest payments. |
Long Questions – Sandeep Garg Macroeconomics Class 12 Solutions Government budget and the Economy
- Define Government budget. Explain the various objectives of a government budget.
- What is meant by non-tax revenue? Explain the different sources of non-tax revenue
- What is meant by budget expenditure? Distinguish between revenue expenditure and capital expenditure.
- What is the meaning of revenue receipts? What are the two main sources of revenue receipts?
- Discuss the meaning of following deficits: (i) Revenue Deficit; (ii) Fiscal Deficit; and (iii) Primary Deficit.
- Distinguish between: (a) Direct Tax and Indirect tax (b) Primary deficit and Revenue deficit
- Distinguish between the following (a) Revenue receipts and Capital receipts (b) Revenue deficit and Fiscal deficit