Economics · General Awareness

Fiscal Policy and Government Budget

1,104 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 business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

What are ways that can be used by the government to correct inflationary gap using surplus budget?

  1. Reduction in taxes

  2. Increase in tax rates

  3. Reduction in public expenditure

  4. Both B & C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Surplus Budget is the type of budget where the expected government revenue is greater than expected government expenditure due to which there is a surplus in the budget. Surplus budget is regarded as a positive indicator for the economy as it can be used during inflation through increased revenue receipts by increasing taxes or through reduction in revenue expenditure by reducing public expenditure that can soak liquidity from the economy and decrease the purchasing power that results in fall of effective demand in the economy.
Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

_____________ budget includes receipts of the government through tax and non-tax sources and that expenditure which doesn't affect the assets and liabilities of the government.

  1. Revenue

  2. Capital

  3. Both A & B

  4. Neither A nor B
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Revenue budget are the money receipts or payments that does not lead to decrease or increase in the value of asset and liability of the government.  It usually includes the tax and non tax receipts of the government and the public services expenditure of the government. 


Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

A __________ budget is useful during periods of high inflation.

  1. deficit

  2. balanced

  3. suprlus

  4. zero-based
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Surplus Budget is the type of budget where the expected government revenue is greater than expected government expenditure due to which there is a surplus in the budget. Surplus budget is regarded as a positive indicator for the economy as it can be used during inflation through increased revenue that can soak liquidity from the economy and decrease the purchasing power. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

A deficit budget leads to an increase in the liability of the government or a decrease in its reserves.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Deficit budget is the type of budget where the estimated government expenditure is greater than the estimated government revenue due to which there is a deficit in the budget. Deficit budget is usually regarded as a negative indicator for the economy as it increases the liability of the government or decreases the reserves of the government. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Which of the following is a component of the capital budget?

  1. Capital receipts

  2. Revenue expenditure

  3. Capital expenditure

  4. Both A & C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital budget are the money receipts or payments that lead to decrease or increase in the value of asset and liability of the government. It is divided into two heads 

1. Capital receipts- Capital receipts are all those money receipts of the government that either creates a liability for the government or reduce an asset of the government.
2. Capital expenditure - Capital expenditure are all those expenditure of the government that either creates an asset for the government or reduce the liability of the government. For example - Expenditure on land and building, purchase of shares etc.

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

A deficit budget proves to be useful during the periods of ____________.

  1. inflation

  2. high employment

  3. depression

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

Deficit budget is the type of budget where the estimated government expenditure is greater than the estimated government revenue due to which there is a deficit in the budget. Deficit budget is usually regarded as a negative indicator for the economy but it is regarded to be useful at the time of depression in the economy as it results in reduced taxes or increased public expenditure that resolves the situation of the depressed economy. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Government budget comprises of which of the following?

  1. Revenue budget

  2. Capital budget

  3. Administration budget

  4. Both A & B
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Budget is a statement of the estimates of the government receipts and government expenditure during the period of the financial year. There are two main component of a budget: 

1. Revenue budget - These are the money receipts or payments that does not lead to decrease or increase in the value of asset and liability of the government. 

2. Capital budget - These are the money receipts or payments that lead to decrease or increase in the value of asset and liability of the government. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

A surplus budget is useful in correcting inflationary gap by lowering the level of _____________.

  1. taxation

  2. effective demand

  3. aggregate supply

  4. income inequality
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation


Surplus Budget is the type of budget where the expected government revenue is greater than expected government expenditure due to which there is a surplus in the budget. Surplus budget is regarded as a positive indicator for the economy as it can be used during inflation through increased revenue receipts by increasing taxes or through reduction in revenue expenditure by reducing public expenditure that can soak liquidity from the economy and decrease the purchasing power that results in fall of effective demand in the economy.

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Revenue receipts of the government are classified into:

  1. Tax revenue and borrowings

  2. Tax and non-tax revenue

  3. Borrowings and recovery of loans

  4. Non-tax revenue and recovery of loans
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Revenue receipts refers to all such types of money receipts that do not create any liability for the government or does not reduce any asset of the government. These basically includes tax and non-tax revenue received by the government from the general public. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Tax revenue is the main source of regular receipts of the government.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Tax revenue are the money receipts of the government by the general public for the basic services which the public is availing from the government. These receipts are recurring in nature and it is an obligation for all the civilians of a country to pay tax. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Budget is a/an _____________ statement of expenditure and revenue of the government prepared by the financial authority of the country.

  1. annual

  2. semi-annual

  3. quarterly

  4. monthly
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Budget is an annual statement of the estimates of the government receipts and government expenditure during the period of the financial year. It unveils the fiscal policy of the government, focusing on growth and stability of the economy. Budget is usually prepared annually keeping in mind the financial year. 
Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Which of the following are the constituents of the budget in India?

  1. Annual statement of accounts for the current year.

  2. Annual statement of accounts for the preceding year.

  3. Estimates of revenue and expenditure for the current year.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Budget is an annual statement of the estimates of the government receipts and government expenditure during the period of the financial year. It unveils the fiscal policy of the government, focusing on growth and stability of the economy. In India, budget is prepared for three consecutive years: preceding year, current year and estimated budget of the upcoming year. 
Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Budget period is the __________.

  1. Period of budget committee

  2. Period of budget centers

  3. Period for which a budget is prepared

  4. Period of budget officer
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A budget period is the specific timeframe for which a budget is prepared, approved, and implemented, typically aligning with a fiscal year or a specific project duration.

Multiple choice geography food security in india components of food security government measures for food security important index numbers

The unsustainable levels of government deficits in the late $80$'s can be attributed to:

  1. High levels of government expenditures

  2. Insufficient revenues

  3. Poor returns on government investments

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

The unsustainable levels of government deficits in the late 80's can be attributed to high levels of government expenditures, insufficient revenues and poor returns on government investments.

Multiple choice economics consumption and investment functions keynesian law of consumption and propensity to consume ex ante and ex post concept of consumption function, saving function and investment function

A reduction in government spending leads to fall in the income and purchasing power of the people.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Reduction in government spending will reduce the level of aggregate demand, which will lead to fall in the income and purchasing power of the people. (The extent of fall in the income and purchasing power depends on the size of multiplier).