Economics · General Awareness

Fiscal Policy and Government Budget

1,089 Questions

Fiscal policy and government budget questions evaluate your knowledge of economic stabilization, public expenditure, and deficit management. These topics are crucial for civil services and banking examinations. Practice these questions to master macroeconomic principles.

Budget deficitsFiscal policy toolsGovernment expenditureExpansionary fiscal policyPublic debt benefits

Fiscal Policy and Government Budget Questions

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

With the exception of development activities, expenditure incurred on administration, defence, interest payment, etc., is called ____________ expenditure.

  1. non-plan

  2. plan

  3. revenue

  4. general
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

With the exception of development activities, expenditure incurred on administration, defence, interest payment, etc., is called non-plan expenditure.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Expenditure made by the government on the purchase of goods and services on current services of factors of production is called _________________.

  1. government direct expenditure

  2. private direct expenditure

  3. government expenditure

  4. total expenditure
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Government direct expenditure refers to the government's spending on goods, services, and factors of production to provide public services.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Public expenditure can be classified as ________________.

  1. Direct and transfer expenditure

  2. Developmental and non-developmental expenditure

  3. Productive and non-productive expenditure

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Public expenditure is multifaceted and can be categorized in various ways, including developmental vs. non-developmental, productive vs. non-productive, and direct vs. transfer payments.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Deficit budget means _____.

  1. the government spends more than its revenue

  2. the government earns more than its expenses

  3. the government imports more than its exports

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A budget deficit is an indicator of financial health in which expenditures exceed revenue. The term budget deficit is most commonly used to refer to government spending rather than business or individual spending, but can be applied to all of these entities.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Plan expenditure in India is met by ________.

  1. internal debt and other resources

  2. assistance from Aid India Club

  3. assistance from IMF

  4. assistance from OECD countries
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • India has adopted economic planning as a strategy for economic develop­ment. The expenditure incurred on the items relating to five year plans is termed as plan expenditure. Such expen­diture is incurred by the Central Government. A provision is made for such expenditure in the budget of the Central Government. Assistance given by the Central Government to the State Governments and Union Territories for plan purposes also forms part of the plan expenditure. 
Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

The excess of government's revenue expenditure over revenue receipts is known as ______.

  1. fiscal deficit

  2. primary deficit

  3. budget deficit

  4. revenue deficit
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A revenue deficit occurs when the net income generated falls short of the projected net income. This happens when the actual amount of revenue  received and/or the actual amount of expenditures do not correspond with budgeted revenue and expenditure figures. 

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

By increasing the expenditure through a deficit budget the government tries to achieve _______.

  1. economic development

  2. savings

  3. increase in incidence of taxes

  4. regulation of prices
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Budget deficit is an indicator of financial health in which expenditures exceed revenue. It refers to government spending rather than business or individual spending and by increasing the expenditure though it, government tries to achieve economic development.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

The statement of estimated income and expenditure of the Government for a year is ______.

  1. public finance

  2. public expenditure

  3. planned expenditure

  4. budget
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A budget is an estimation of the revenue and expenses over a specified future period of time and is compiled and re-evaluated on a periodic basis. A surplus budget means profits are anticipated, while a balanced budget means that revenues are expected to equal expenses. A deficit budget means expenses will exceed revenues.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Which of these is a productive public expenditure?

  1. Expenditure on law and order

  2. Expenditure on defense

  3. Expenditure on infrastructure development

  4. Expenditure on education
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Productive expenditure refers to spending that increases the productive capacity of the economy, such as infrastructure, which facilitates trade and production.

Multiple choice economics public expenditure public expenditure public finance and budget public finance, taxes and budget

Which of the following is not a productive public expenditure?

  1. Expenditure on defence

  2. Expenditure on infrastructure development

  3. Expenditure on setting up basic industries

  4. Expenditure to increase the welfare of the population
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Defense expenditure is generally classified as non-productive because it does not directly contribute to the production of goods and services for the economy, even though it is necessary for security.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

_________ determines the priorities of functional budget.

  1. Principal Budget Factor

  2. Limiting Factor

  3. Both (A) and (B)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The principal budget factor is the factor that limits the activities of functional budgets of the organisation. The early identification of this factor is important in the budgetary planning process because it indicates which budget should be prepared first. In general sales volume is the principal budget factor.

The principle that the factor (such as a particular nutrient, water, or sunlight) that is in shortest supply (the limiting factor) will limit the growth and development of an organism or a community.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

The budget that is prepared first is _______________.

  1. Budget for the key factor

  2. Cash budget

  3. Master budget

  4. Flexible budget
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Firstly, determine the principal budget factor. This is also known as the key budget factor or limiting budget factor and is the factor which will limit the activities of an undertaking. This limits output, e.g. sales, material or labour.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Budget is a projection of ________________.

  1. Cost accounts

  2. Financial accounts

  3. Management accounts

  4. Corporate accounts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial Projections – “A forecast of future revenues and expenses for a business, organization, or country. 

Budget – “An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.”