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

Which of the following is not a tool of fiscal policy?

  1. Marginal Standing Facility

  2. Deficit financing

  3. Capital levy

  4. Progressive taxation

  5. Transfer payment
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Marginal Standing Facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation, when inter-bank liquidity dries up completely.

Multiple choice

Increase in net RBI credit for central government happens in case of

  1. Budgetary deficit

  2. Revenue deficit

  3. Monetised deficit

  4. Fiscal deficit

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

Monetised deficit refers to the situation where the government covers its fiscal deficit by borrowing from the central bank (RBI), which leads to an increase in net RBI credit to the government.

Multiple choice

Many times we read in financial newspapers/ magazines and journals that Govt. is making efforts to inculcate habit of saving amongst the people. What is the correct definition of 'saving'?

  1. This is the difference between the total income of an individual after deduction of all taxes and dues levied by the Govt. authorities.
  2. This is the difference between aggregate income and aggregate consumption by an individual.
  3. This is the amount which every individual has to keep in his/her bank account as the minimum balance.

  1. Only 1

  2. Only 2

  3. Only 3

  4. Both 1 and 3
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In economics, saving is defined as the portion of disposable income that is not spent on consumption. It is the difference between total income and total consumption.

Multiple choice

As per the Budget Estimates 2010-11, fiscal deficit as a percentage of GDP was

  1. 4.5%

  2. 5·5%

  3. 6%

  4. 5%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per the Budget Estimates 2010-11, fiscal deficit as a percentage of GDP was 5.5%. The fiscal deficit was estimated at Rs. 3.81 Lakh Crores which is 5.5% of GDP of Rs. 69.35 Lakhs Crores estimated by CSP at 2010-11 prices at that time according to the budget estimates.

Multiple choice

Government policies are

  1. purchasing policies of the government

  2. subsidy Policies

  3. production and distribution policies of public sector

  4. policies relating to marketing of a public sector

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

Government policies in a business context encompass a broad range of activities, including purchasing, subsidies, and the regulation of production and distribution in the public sector.

Multiple choice

The funding of which of the following enterprise comes directly from the government treasury, is under an annual appropriation from the budget of the government and the revenue earned by it is also paid into the treasury?

  1. Departmental undertaking

  2. Statutory corporation

  3. Government company

  4. Cooperatives

  5. Public limited company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer. The funding for a departmental undertaking comes directly from the government treasury, is under an annual appropriation from the budget of the government and the revenue earned by it is also paid into the treasury.

Multiple choice

The money which Govt. of India spends on the development of infrastructure in country comes from which of the following sources?

  1. Loan from World Bank, ADB etc
  2. Taxes from the people
  3. Loan from RBI

  1. Only 1

  2. Only 2

  3. Only 3

  4. Both 1 and 2

  5. All 1, 2 and 3
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Government infrastructure spending is financed through a combination of tax revenue, domestic borrowing, and external loans from international financial institutions like the World Bank or ADB. All these sources contribute to the national budget for development projects.

Multiple choice

Government non-development expenditure involves I. interest payments II. subsidies III. defence IV. irrigation

  1. II and III

  2. I, II and III

  3. I and IV

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

Non-development expenditure refers to government spending that does not contribute directly to productive capacity. This includes interest payments on debt, subsidies, and defense spending. Irrigation is typically classified as development expenditure.

Multiple choice

Directions: Select the two answer choices that, when used to complete the sentence, fit the meaning of the sentence as a whole and produce completed sentences that are alike in meaning.

The budget would address the way in which wealthy unscrupulous people reduce their tax bills, which is by employing _______ accountants and taking deductions for things like mortgage interest, state taxes, charitable donations, and Cadillac health-care plans.

  1. ingenious

  2. adept

  3. crafty

  4. ingenuous

  5. naive

  6. wily
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

“…..wealthy, unscrupulous people…….” hints that they reduce their tax bills with deceit. For this purpose they will hire accountants, who will collude with them in this guile. So crafty (marked by skill in deception) and wily (marked by skill in deception) fit the bill.

Multiple choice

Which one of the following statements appropriately describes the “fiscal stimulus”?

  1. It is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth.

  2. It is an intense affirmative action of the government to boost economic activity in the country.

  3. It is Government's intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation.

  4. It is an extreme affirmative action by the Government to pursue its policy of financial inclusion.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fiscal stimulus- It is an intense affirmative action of the Government to boost economic activity in the country. Government measures, normally involving increased public spending and lower taxation, aimed at giving a positive jolt to economic activity.

Multiple choice

Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?

  1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.
  2. The Government no longer intends to retain the management control of the CPSEs.

Which of the statements given above is/are correct?

  1. 1 only

  2. 2 only

  3. Both 1 and 2

  4. Neither 1 nor 2
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The salient features of the Disinvestment Policy are:  Citizens have every right to own part of the shares of Public Sector Undertakings.  Public Sector Undertakings are the wealth of the Nation and this wealth should rest in the hands of the people.  While pursuing disinvestment, Government has to retain majority shareholding, i.e. at least 51% and management control of the Public Sector Undertakings.  Use of Disinvestment Proceeds  The income from the fund is to be used for the following broad investment objectives:  (a) 75% to finance selected social sector schemes, which promote education, health and employment  (b) 25% to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/diversification