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 meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

The difference between total expenditure and total receipts except loans and other liabilities is called ______.

  1. fiscal deficit

  2. budget deficit

  3. primary deficit

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

Fiscal deficit refers to the excess of total expenditure over total receipts (excluding borrowings) during the given fiscal year. Fiscal Deficit = Total Expenditure – Total Receipts excluding borrowings. The extent of fiscal deficit is an indication of how far the government is spending beyond its means.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Study of income and expenditure of government at state, central and local levels is called ______.

  1. marketing

  2. public financing

  3. socio-economic study

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

Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

The difference between fiscal deficit and interest payment during the year is called ______.

  1. fiscal deficit

  2. budget deficit

  3. primary deficit

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

Primary deficit is one of the parts of fiscal deficit. While fiscal deficit is the difference between total revenue and expenditure, primary deficit can be arrived by deducting interest payment from fiscal deficit. Interest payment is the payment that a government makes on its borrowings to the creditors.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

What are the features of Fiscal Responsibility and Budget Management Act, (FRBMA) 2003? 

  1. To reduce fiscal deficit to not more than 3 percent of GDP

  2. To ensure greater transparency in fiscal operations.

  3. To eliminate the revenue deficit by March 31, 2009

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

The FRBMA is an act which institutionalizes and regulates financial discipline and help manage public funds in order to strengthen India's fiscal position. The purpose of FRBMA was to reduce fiscal deficit. 

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Borrowing from all the sides like net borrowing from RBI and from abroad gives _______.

  1. fiscal deficit

  2. budget deficit

  3. primary deficit

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

The budget deficit is the difference between current government's spending on goods and services and total current revenue from all types of taxes net of transfer payments. So when borrowing is done from RBI or other sources, that creates the budget deficit.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

The difference between total expenditure and total receipts except loans and other liabilities is called _______.

  1. fiscal deficit

  2. budget deficit

  3. primary deficit

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

The fiscal deficit is the primary deficit plus interest payments on the debt. Therefore, if refers to the difference in total expenditure and total receipts without loan and other liability.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

The government manages the public finance through __________.

  1. fiscal policy

  2. budget policy

  3. revenue policy

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

By means of fiscal policy, government adjusts its spending levels and tax rates to monitor and influence a nation's economy. Though fiscal policies, government makes its public finance.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Deficit financing involves ________.

  1. borrowings from India

  2. printing of more currency

  3. none of the above

  4. both (a) & (b) above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Deficit financing involves both borrowing from domestic sources including the RBI and printing additional currency to meet government expenditure when revenue falls short. Both methods increase money supply in the economy.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Fiscal responsibility and budget management Act aims at reducing gross fiscal deficit by _______ $\%$ of GDP in each financial year.

  1. $0.5\%$
  2. $1\%$
  3. $1.5\%$
  4. $2\%$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The FRBM Act, 2003, mandates that the central government reduce the fiscal deficit by at least 0.5% of GDP annually to ensure long-term fiscal stability.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

___________ is the difference between total receipts and total expenditure.

  1. Fiscal deficit

  2. Budget deficit

  3. Revenue deficit

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

Budget deficit refers to the shortfall of revenues in comparison to the government expenditure. It can be measured as the difference between Total Receipts and Total Expenditure.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

What is the budgetary deficit?

  1. It is the difference between all receipts and expenditure.

  2. It is the difference between all expenditure and receipts.

  3. The difference between government loans and credits recovered.

  4. Government assets and liabilities.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A budgetary deficit occurs when the government's total expenditure exceeds its total receipts (revenue and capital).

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Deficit financing means financing of _________.

  1. public expenditure which is in excess of public revenue

  2. public revenue which is in excess of public expenditure

  3. both (a) and (b)

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

Deficit financing specifically refers to the method of funding public expenditure that exceeds the revenue generated by the government.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

What does an increase in the ratio of revenue deficit to gross fiscal deficit indicate?

  1. An increase in investment

  2. An increase in the utilisation of borrowed funds for revenue purposes

  3. An increase in the utilisation of borrowed funds for imports

  4. An increase in the utilisation of borrowed funds for lending
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

$Revenue\ deficit:$ Revenue expenditure of the Central Govt is composed of plan and non-plan expenditure of the Government and is met out of revenue receipts. In case of a gap in the revenue receipts and revenue expenditure, where the expenditure is on the higher side, there exists a revenue deficit which is financed from borrowed funds.


$Fiscal\ deficit$ is the sum of budgetary deficit and the borrowed liabilities of the government for deficit financing. It indicates the total deficit of the fiscal policy. 

An increase in the ratio of revenue deficit to gross fiscal deficit would indicate higher revenue deficit, which requires use of deficit financing/borrowing for the purpose of revenue expenditure, i.e, into those avenues which would not generate any productive returns in the future.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

If borrowings and other liabilities are added to the budget deficit it is termed as __________.

  1. fiscal deficit

  2. primary deficit

  3. capital deficit

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

The fiscal deficit is calculated as the total budget deficit plus the government's borrowings and other liabilities.