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

The Finance Commission is primarily concerned with recommending to the President about

  1. the principle governing grants in aid to be given to the states

  2. distributing the net proceeds of the taxes between the centre and the states

  3. neither (A) nor (B)

  4. both (A) and (B)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Finance Commission, under Article 280, recommends both the principles governing grants-in-aid to states (distributing central funds to needy states) and the distribution of net tax proceeds between the Centre and states (vertical devolution). Both these functions are core to its mandate of fiscal federalism.

Multiple choice

Which of the following estimates made in the Union Budget 2010-11 is incorrect?

  1. Non-Plan Expenditure: Rs. 7,35,657 crore

  2. Plan Expenditure: Rs. 3,73,092 crore

  3. Revenue Deficit: Rs. 2,76,512 crore

  4. Fiscal Deficit: Rs. 3,81,408 crore

  5. All of the above
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

|| |---| |

Estimates for financial year 2010-11 made in the Union Budget 2010-11
| ||| |---|---| |
Gross Tax Receipts
|
Rs. 7,46,651 crore
| |
Non Tax Revenue Receipts
|
Rs. 1,48,118 crore
| |
Total Non-Plan Expenditure
|
Rs 7,35,657 crore
| |
Plan Expenditure
|
Rs 3,73,092 crore
| |
Total Expenditure
|
Rs 11,08,749 crore
| |
Revenue Deficit
|
Rs 2,76,512 crore
| |
Fiscal Deficit
|
Rs 3,81,408 crore
|

Multiple choice

The Indian Budget includes

  1. Revised estimates for the current year

  2. Revised estimates for the following year

  3. Actual figures of the preceding year

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

The Indian Budget is a comprehensive financial document that includes multiple components: actual figures from the preceding year (for comparison), revised estimates for the current year (updated projections), and budget estimates for the following year. All these elements are presented together in the budget documents to provide a complete picture of government finances.

Multiple choice

Assertion (A) : The structural adjustment programme encourages State spending and budget deficit to spur growth.Reason (R) : The International Monetary Fund wants to ensure that money lent to a country is not spent for politically popular purposes but it is spent for purposes without economically profitable motives.

  1. Both A and R are true, and R is the correct explanation of A

  2. Both A and R are true, but R is not a correct explanation of A

  3. A is true, but R is false

  4. A is false, but R is true
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Structural adjustment programmes typically require fiscal austerity, reduction of state spending, and control of budget deficits, making Statement A false. Statement R correctly describes the conditionality approach often associated with international financial institutions like the IMF to ensure loan repayment. Therefore, A is false and R is true.

Multiple choice

While prescription drugs have shown a steep and sustained increase in prices over the past few years, increase in price of over-the-counter drugs has rather been subdued.

Which of the following statements best explains the reason for the marked difference in the price trends of the two types of drugs?

  1. Over-the-counter drugs could enjoy the economy of scale.

  2. Over-the-counter drugs are more easily available.

  3. Sale of prescription drugs is brand dependent.

  4. Prescription drugs use some ingredients that need to be imported.

  5. What are prescription drugs today will become over-the-counter drugs tomorrow.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Prescription drugs being branded face lesser competition. OTC medications, on the other hand, face severe competition as a consumer can ask for any brand.

Multiple choice

Fiscal-deficit is

  1. Total expenditure -Total receipts

  2. Revenue expenditure - Revenue receipts

  3. Capital expenditure - Capital receipts - Borrowings

  4. Sum of budget deficit and Govt' s market borrowings and Liabilities
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowings). It represents the total amount of borrowing the government needs to cover its expenses.

Multiple choice

As in December 2011, America's gross debt was

  1. $12.617 trillion
  2. $10.50 trillion
  3. $15.098 trillion
  4. $9.85 trillion
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

By the end of 2011, the United States national debt had reached approximately 15 trillion dollars, a figure widely reported in financial news during that period.