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 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.

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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).

Multiple choice commercial applications concept of market and marketer meaning, types, stages and role of marketing meaning and definition of marketer role of marketing

Capital budgeting decisions are

  1. Expected to bring in additional revenue

  2. Those which reduce costs

  3. Both (a) and (b)

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

Capital budgeting involves long-term investments that are expected to generate future revenue or reduce operational costs, thereby increasing the firm's value.

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Excess of revenue income over revenue expenditure is termed as loss.

  1. True

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

Excess of revenue income over revenue expenditure is not a loss rather it is net income. Net income is one of the key indicators of company profitability, along with gross margin and before tax income. For example - revenue of ₹ 10,00,000 and expenses of ₹900,000 yield net income of ₹100,000. In this example, if the amount of expenses had been higher than revenues, the result would have been termed a net loss rather than a net income. 

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Excess of income over expenditure is also known as ____________.

  1. Profit

  2. Surplus

  3. Lass

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

Surplus is the excess of income over expenditure. A credit balance in the Income and expenditure account shows surplus. It is the profit earned and should be added to the capital fund on the liabilities side of the balance sheet. 

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Government expenditure increases aggregate demand.

  1. True

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

True.  Government expenditure increases Aggregate demand. Its one of the components to determine demand. Aggregate demand takes into account all the expenditure incurred in the country during the year. Government spending can be in the form of welfare, pension etc which increases the purchasing power of the people thereby increasing demand. 

Multiple choice political science constitutional amendment constitutional amendment powers of lok sabha powers of lok sabha powers and functions of rajya sabha and lok sabha

State which of the following statements is incorrect:

  1. A Money Bill deals with imposition, remission, alteration or regulation of tax

  2. A Money Bill deals with regulation borrowing money or giving of any guarantee by the Government

  3. A Money Bill deals with the money of the Consolidated Fund

  4. A Money Bill is one which provides for the imposition of fines or fees
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Money Bills generally deals with matters relating to the imposition, abolition, remission, alteration or regulation of any tax. A bill is not a money bill if it provides for:
The imposition of fines or other pecuniary penalties or the demand or payment of a fee.