Government Budget and the Economy Class 12 MCQ are covered in this Article. Government Budget and the Economy Class 12 MCQ Test contains 65 questions. Answers to MCQ on Government Budget and the Economy Class 12 Economics are available after clicking on the answer.
Government Budget and the Economy Class 12 MCQ
1. The amount received 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
Answer: (c) Non-tax revenue receipts
2. Financial year runs from
a) 1 April to 31 March
b) 1 January to 31 December
c) 1 March to 28 February
d) None of these
Answer
Answer: (a) 1 April to 31 March
3. The amount received by the Government in the form of taxes and duties is known as _______
a) Capital receipts
b) Tax revenue receipts
c) Non-tax revenue receipts
d) All of these
Answer
Answer: (b) Tax revenue receipts
4. What is the objective of Government Budget.
a) Economic Development
b) Balanced Regional Development
c) Redistribution of Income and Wealth
d) All the above
Answer
Answer: (d) All the above
5. The expenditures which neither create an asset, nor reduce any liability for the Government is called :
a) Revenue Expenditure
b) Capital Expenditure
c) Both (a) and (b)
d) None of the above
Answer
Answer: (a) Revenue Expenditure
6. Which deficit indicates the borrowing needs of a Government?
a) Budgetary deficit
b) Revenue deficit
c) Primary deficit
d) Fiscal deficit
Answer
Answer: (d) Fiscal deficit
7. Which of the following is not an objective of Government budget?
a) Redistribution of income and wealth
b) Export promotion
c) Social welfare
d) Economic Stability
Answer
Answer: (b)Export promotion
8. What is the period for which a Government budget is prepared?
a) Two years
b) One Year
c) Five years
d) None of these
Answer
Answer: (b)One Year
9. What does a Government budget represent?
a) Actual revenue and estimated expenditure
b) Estimated revenue and actual receipt
c) Estimated receipt and estimated expenditure
d) All of these
Answer
Answer: (c) Estimated receipt and estimated expenditure
Government Budget and the Economy Class 12 MCQs
10. Corporate tax and income tax are examples of which tax ?
a) Indirect tax
b) Direct tax
c) Wealth Tax
d) None of these
Answer
Answer: (b) Direct tax
11. Disinvestment is which type of receipt for the Government?
a) Capital Receipt
b) Revenue Receipt
c) Both a and b
d) None of these
Answer
Answer: (a)Capital Receipt
12. Tax whose burden cannot be shift is termed as
a) Indirect tax
b) Direct tax
c) Both a and b
d) None of these
Answer
Answer: (b) Direct tax
13. The sources to meet fiscal deficit are
a) Borrowings from public
b) Borrowings from external sources
c) Deficit financing
d) All of these
Answer
Answer: (d)All of these
14. Which Budget is prepared by the Central Government.
a) General Budget
b) Zero based Budget
c) Union Budget
d) None of these
Answer
Answer: (c)Union Budget
15. Components of the budget are
a) Revenue Budget
b) Capital Budget
c) Both a and b
d) None of these
Answer
Answer: (c)Both a and b
16. Which of the following is treated as Capital receipt
a) Recovery of Loans
b) Interest received on loans
c) Gifts and Grants
d) Escheats
Answer
Answer: (a)Recovery of Loans
17. Receipts from Post Office deposits and Kisan Vikas Patras is treated as
a) Capital receipt
b) Revenue receipt
c) Both a and b
d) None of these
Answer
Answer: (a)Capital receipt
18. Which expenditure will either create an asset or reduce the liability of the Government?
a) Revenue expenditure
b) Capital expenditure
c) Capital receipt
d) Revenue receipt
Answer
Answer: (b)Capital expenditure
19. Subsidies and expenditure on scholarship are examples of :
a) Revenue expenditure
b) Capital expenditure
c) Capital receipt
d) Revenue receipt
Answer
Answer: (a)Revenue expenditure
Government Budget and the Economy Class 12 MCQs
20. If the Government estimated receipts are less than estimated expenditure, then it is termed as
a) Deficit Budget
b) Surplus Budget
c) Balanced Budget
d) All of these
Answer
Answer: (a)Deficit Budget
21. Revenue deficit can be reduced by
a) Reducing Government expenditure
b) Increasing source of revenue
c) Reducing tax evasion
d) All of these
Answer
Answer: (d)All of these
22. ________ is an annual statement showing estimated receipt and expenditure of the Government, during a fiscal year.
a) Government Budget
b) Government Receipt
c) Government Payment
d) None of these
Answer
Answer: (a)Government Budget
23. Union Budget is the budget of ________.
a) State Government
b) Central Government
c) Union Territory
d) All of these
Answer
Answer: (b)Central Government
24. _____ is / are objective of Government budget.
a) Economic Stability
b) Regional equality
c) Reduction of poverty
d) Both a and b
Answer
Answer:(d)Both a and b
25. The components of Government budget are_________
a) Revenue Budget
b) Capital Budget
c) Both A and B
d) None of these
Answer
Answer: (c)Both A and B
26. _____ receipts are recurring in nature.
a) Revenue
b) Capital
c) Both a and b
d) None of these
Answer
Answer: (a)Revenue
27. ______receipts are non-recurring in nature.
a) Revenue
b) Capital
c) Both a and b
d) None of these
Answer
Answer: (b)Capital
28. _____ revenues and ____ revenues are the sources of revenue receipt.
a) Tax
b) Non- tax
c) Both a and b
d) None of these
Answer
Answer: (c)Both a and b
29. Revenue receipts neither create _____ nor reduce, the ___ of the Government.
a) liability, An asset
b) An Asset, liability
c) Revenue, Expenditure
d) None of these
Answer
Answer: (b)An Asset, liability
30. Capital gains tax is an example of_______tax.
a) Direct tax
b) Indirect tax
c) Both a and b
d) None of these
Answer
Answer: (a)Direct tax
31. Interest and escheats are examples of ____ receipt.
a) Tax revenue
b) Non- tax revenue
c) Both a and b
d) None of these
Answer
Answer: (b)Non-tax Revenue
32. ________ either creates a liability, or reduce the Asset of the Government.
a) Revenue receipt
b) Capital receipt
c) Revenue expenditure
d) Capital expenditure
Answer
Answer: (b)Capital receipt
33. In case of some capital receipts, there is a ________ to return the amount with interest at a future date
a) Future obligation
b) Contingent obligation
c) Past obligation
d) None of these
Answer
Answer: (a)Future obligation
Government Budget and the Economy Class 12 MCQs
34. __________ is an example of capital receipt .
a) Interest
b) Escheats
c) Borrowings
d) All of these
Answer
Answer: (c)Borrowings
35. When the estimated receipt is equal to estimated expenditure, the budget is said to be a _____.
a) Surplus
b) Deficit
c) Balanced
d) None of these
Answer
Answer: (c)Balanced
36. Revenue expenditure is ___ where as capital expenditure is ____ in nature.
a) Non-recurring ,Recuring
b) Recurring, Non-recurring
c) Both a and b
d) None of these
Answer
Answer: (b)Recurring, Non-recurring
37. The formula for fiscal deficit is_____.
a) Fiscal Deficit = Total expenditure – Total receipts excluding borrowings
b) Fiscal Deficit = Total expenditure – Total receipts
c) Fiscal Deficit = Total expenditure – Total receipts excluding Capital receipts
d) None of these
Answer
Answer: (a)Fiscal Deficit = Total expenditure – Total receipts excluding borrowings
38. Revenue deficit is computed as ____.
a) Revenue Deficit = Revenue expenditure – Total receipts
b) Revenue Deficit = Revenue expenditure – Revenue receipts
c) Revenue Deficit = Revenue expenditure – Revenue receipts
d) None of these
Answer
Answer: (b)Revenue Deficit = Revenue expenditure – Revenue receipts
39. Primary deficit is computed as _____.
a) Primary Deficit = Revenue Deficit – Interest payment
b) Primary Deficit = Fiscal Deficit – Interest received
c) Primary Deficit = Fiscal Deficit – Interest payment
d) None of these
Answer
Answer: (c)Primary Deficit = Fiscal Deficit – Interest payment
40. A zero primary deficit indicates forced borrowings of the Government , due to interest commitment on _____.
a) Earlier Loans
b) Future Loans
c) Both a and b
d) None of these
Answer
Answer: (a)Earlier Loans
41. Read the following statement given below and choose the correct alternative
Statement 1- Economic stability refers to absence of fluctuation in price of goods and services
Statement 2- Economic instability discourages investment
a) Both are correct
b) Both are wrong
c) Statement 1 is correct and statement 2 is wrong
d) Statement 2 is correct and statement 1 is wrong
Answer
Answer: (a) Both are correct
42. Read the following statement given below and choose the correct alternative
Statement 1- Government imposes high rate of income tax on higher income groups
Statement 2- Low income groups pay high amount of tax
a) Both are correct
b) Both are wrong
c) Statement 1 is correct and statement 2 is wrong
d) Statement 2 is correct and statement 1 is wrong
Answer
Answer: (c) Statement 1 is correct and statement 2 is wrong
Government Budget and the Economy Class 12 MCQs
43. Read the following statement given below and choose the correct alternative
Statement 1- In case of inflation, government decreases rate of tax
Statement 2- In case of deflation, government increases rate of tax
a) Both are correct
b) Both are wrong
c) Statement 1 is correct and statement 2 is wrong
d) Statement 1 is wrong and statement 2 is correct
Answer
Answer: (b) Both are wrong
44. Read the following statement given below and choose the correct alternative
Statement 1- Revenue deficit occurs when Revenue expenditure is more than revenue receipts
Statement 2- Fiscal deficit is the excess of budget expenditure over budget receipts
a) Both are correct
b) Both are wrong
c) Statement 1 is correct and statement 2 is wrong
d) Statement 2 is correct and statement 1 is wrong
Answer
Answer: (c) Statement 1 is correct and statement 2 is wrong
45. Read the statement given below and choose the correct alternative
Statement 1- Fiscal deficit includes borrowings to create loan
Statement 2- Fiscal deficit depicts borrowings required to meet current year budget expenditure
a) Both are correct
b) Both are wrong
c) Statement 1 is correct and statement 2 is wrong
d) Statement 1 is wrong and statement 2 is correct
Answer
Answer: (d) Statement 1 is wrong and statement 2 is correct
46. Choose the correctly matched pair from the given alternative
| Column A | Column B |
| A. Income tax | 1. The tax on corporate profits |
| B. Corporate tax | 2. The tax on income of individuals |
| C. Wealth tax | 3. The tax on wealth of individual |
a) A-1
b) B-2
c) C-3
Answer
Answer: (c) C-3
47. Choose the correctly matched pair from the given alternative
| Column A | Column B |
| A. Government takes resort to a surplus budget. | 1. Reduces liability |
| B. Revenue expenditure | 2. To solve the problem of excess demand |
| C. Lending | 3. Creates assets |
| D. Repayment of loan | 4. Expenditure on government hospitals and schools |
a) A-3
b) B-2
c) C-4
d) D-1
Answer
Answer: (d) D-1
48. Choose the correctly matched pair from the given alternative
| Column A | Column B |
|
A. Used to correct inflation |
| 2. Deficit budget | B. Budget expenditure= Budget receipt |
| 3. Balanced budget | C. Revenue deficit and fiscal deficit |
| 4. Types of deficit budget | D. Used by under developed countries |
a) A-1
b) B-2
c) C-3
d) D-4
Answer
Answer: (a) A-1
49. “Prior to 1991, the central government owned 100% of the shares of public sector undertakings. Consequently it started selling its shares to general public and financial institutions”. This situation is known as
a) Plan expenditure
b) Disinvestment of PSUs
c) Borrowing
d) Mismanagement
Answer
Answer: (b) Disinvestment of PSUs
50. “Loans recovered by the Central Government from state and local government are capital receipts because”
a) It creates liability
b) Reduce unnecessary expenditure
c) Of fiscal mismanagement
d) It reduces assets
Answer
Answer: (d) It reduces assets
Government Budget and the Economy Class 12 MCQs
51. Read the following statement given below and choose the correct alternative
Assertion (A) – To increase the rate of investment the government makes Direct investment in public sector units.
Reason (R ) – Investment by the government induces the private sector to make investment.
a) Both assertion and reason are true. Reason is the correct explanation of assertion
b) Both assertion and reason are true. Reason is not the correct explanation of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is false
Answer
Answer: (a) Both assertion and reason are true. Reason is the correct explanation of assertion
52. Read the following statement given below and choose the correct alternative
Assertion (A)- Private sector is not interested to enter in production areas such as free education and health facilities
Reason ( R)- Production areas incurs huge investment and low profit
a) Both assertion and reason are true. Reason is not the correct explanation of assertion
b) Both assertion and reason are true. Reason is the correct explanation of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (b) Both assertion and reason are true. Reason is the correct explanation of assertion
53. Read the following statement given below and choose the correct alternative
Assertion (A)- Tax receipt from production of unsocial goods is used to grant subsidy for production of necessary goods.
Reason (R )- Government offers various types of concession on these products
a) Both assertion and reason are true. Reason is not the correct explanation of assertion
b) Both assertion and reason are true. Reason is the correct explanation of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (c) Assertion is true but reason is not
54. Read the following statement given below and choose the correct alternative
Assertion (A)- Government imposes high rate of income tax on higher income groups.
Reason ( R)- Low income groups are unable to pay high taxes
a) Both assertion and reason are true. Reason is the correct explanation of assertion
b) Assertion is true but reason is not
c) Both assertion and reason are true. Reason is not the correct explanation of assertion
d) Reason is true but assertion is not
Answer
Answer: (c) Both assertion and reason are true. Reason is not the correct explanation of assertion
55. Read the following statement given below and choose the correct alternative
Assertion (A)- Government increases rate of tax and imposes new taxes and reduces expenditure.
Reason ( R)- Government take resort of deficit budget to solve the problem of deflation
a) Both assertion and reason are true. Reason is the correct explanation of assertion
b) Both assertion and reason are true. Reason is not the correct explanation of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (b) Both assertion and reason are true. Reason is not the correct explanation of assertion
56. Excess of budget expenditure over budget receipts excluding_______ is called fiscal deficit. ( Fill in the blank with correct alternative)
a) Borrowings
b) Revenue receipts
c) Revenue expenditure
d) Capital expenditure
Answer
Answer: (a) Borrowings
57. Read the following statement given below and choose the correct alternative
Statement 1- Fiscal deficit indicates requirement of borrowing to meet budget expenditure
Statement 2- Fiscal deficit indicates management and discipline of government
a) Both are correct
b) Both are correct
c) Statement 1 is correct and statement 2 is wrong
d) Statement 1 is wrong and statement 2 is correct
Answer
Answer: (c) Statement 1 is correct and statement 2 is wrong
58. Choose the correctly matched pair from the following
| Column A | Column B |
| A. Borrowings of government from foreign government | 1. Leads to interference in formulation of domestic policies |
| B. Revenue expenditure | 2. Reduces investment capacity of future generations |
| C. Burden to pay loan along with interest | 3. Considered non consumption expenditure |
a) A-1
b) B-2
c) C-3
Answer
Answer: (a) A-1
59. Read the following statement given below and choose the correct alternative
Assertion (A)- As a result of fiscal deficit, government gets caught in an unending cycle of debt trap
Reason (R )- To meet its expenses government increases their borrowing which eventually increases the fiscal deficit
a) Both assertion and reason are true. Reason is the correct explanation of assertion
b) Both assertion and reason are true. Reason is not the correct explanation of assertion
c) Assertion is true but reason is not
d) Reason is true but assertion is not
Answer
Answer: (a) Both assertion and reason are true. Reason is the correct explanation of assertion
60. Fiscal deficit is the sum of ( Choose the correct alternative)
a) Primary deficit and Interest payment
b) Borrowings and disinvestment
c) Expenditure and receipts
d) Capital and revenue expenditure
Answer
Answer: (a) Primary deficit and Interest payment
Read the given case study and answer the questions given below.
1. Revenue Budget: Revenue Budget contains the two sorts of the income receipts of the public authority, i.e., Tax income and Non duty income ; and the Revenue use.
(I) Revenue Receipts: These are the receipts that neither make any obligation nor decrease in resources of the public authority. It incorporates charge incomes like personal duty, company charge and non-charge income like fines and punishments, unique appraisal, escheat and so forth
(ii) Revenue Expenditure: A consumption that neither makes any resources nor causes decrease of obligation is called income use.
(b) Capital Budget: Capital financial plan contains capital receipts and capital consumption of the public authority.
(I) Capital Receipts: Government receipts that either make liabilities (of installment of advance) or decrease resources (on disinvestment) are called capital receipts. Capital receipts incorporate things, which are non-dreary and non-everyday practice in nature.
(ii) Capital Expenditure: This consumption of the public authority either makes physical or monetary resources or decrease of its risk. Securing of resources like land, hardware, gear, its advances and advances to state governments and so on are its models.
2. Budget receipts (government receipt): Budget receipt alludes to the assessed receipts of the public authority from different sources during a monetary year. It shows the sources from where the public authority expects to get cash to back the consumption.
61. Which of the following statements are correct. ( Choose the correct alternative)
a) Budget receipts are government receipts
b) Capital expenditure creates assets
c) Revenue expenditure doesn’t causes reduction in liability
d) All of the above
Answer
Answer: (d) All of the above
62. _______ either creates liabilities or reduces assets. ( Fill in the blank with correct alternative)
a) Capital receipts
b) Revenue receipts
c) Capital expenditure
d) Revenue expenditure
Answer
Answer: (a) Capital receipts
63. _______ are the estimated receipts of the government from various sources during a fiscal year. ( Fill in the blank with correct alternative)
a) Budget expenditure
b) Capital expenditure
c) Budget receipts
d) Revenue receipts
Answer
Answer: (c) Budget receipts
64. Which of the following are true for revenue expenditure. ( Choose the correct alternative)
a) Creates assets
b) Reduces liability
c) Do not reduce liability
d) All of the above
Answer
Answer: (c) Do not reduce liability
65. Which of the following are examples of revenue receipts. ( Choose the correct alternative)
a) Income tax
b) Corporation tax
c) Escheats
d) All of the above
Answer
Answer: (d) All of the above
CBSE Class 12 Economics Term 1 MCQ Based Questions
Part A: Introductory Macroeconomics
- Money and Banking Class 12 MCQs – 6 Marks
- Government Budget and the Economy – 6 Marks
- Balance of Payments Class 12 MCQs – 6 Marks
- Foreign Exchange Rate MCQs
Part B: Indian Economic Development
Development Experience (1947-90) and Economic Reforms since 1991:- 12 Marks
- Indian Economy on the eve of Independence MCQs
- Indian Economy (1950-90) MCQs
- Economic Reforms since 1991 MCQs
Current challenges facing Indian Economy – 10 Marks
Frequently Asked Questions on Government Budget and the Economy Class 12 MCQ
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