Tag: public finance

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Questions Related to public finance

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

The budget in which its tax revenue and expenditure are equal is called ____________.

  1. surplus budget

  2. balanced budget

  3. unbalanced budget

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

Balanced budget refers to a situation where the budget expenditure of the government on tax is equal to the budget revenue of the government from tax paid by the public.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Excess of total expenditure over total receipts is known as __________.

  1. budgetary deficit

  2. revenue deficit

  3. fiscal deficit

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

Budgetary deficit also known as government deficit refers to a situation when the budget expenditure of the government are greater than the budget revenue of the government due to which the expenses exceed the revenue. 

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Write true or false with a reason:
Increase in income of the consumer is the only cause that leads to a parallel shift of budget line to the right.

  1. True

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

Budget line shifts to right

(i) when income of consumer increases assuming price of two goods remains unchanged, and 
(ii) when there is proportionate fall in the prices of two goods, income of the consumer remaining unchanged.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Given the money income and the price, the line which shows all different combinations of two goods that a consumer can buy by spending all his income is called __________.

  1. production line

  2. budget line

  3. iso-cost line

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

The budget line represents all combinations of two goods that a consumer can afford given their income and the prices of the goods.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

A shift in the budget line, when prices are constant, is due to:

  1. change in demand

  2. change in income

  3. change in preferences

  4. change in utility
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A budget line represents all combinations of goods a consumer can afford given their income and prices. If prices remain constant, a change in the consumer's income shifts the budget line outward (if income increases) or inward (if income decreases).

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Slope of budget line is Indicated by:

  1. $\displaystyle \frac{P _X}{P _Y}$

  2. $\displaystyle \frac{P _Y}{P _X}$

  3. $P _X = P _Y$

  4. all of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The slope of the budget line is determined by the ratio of the prices of the two goods. It represents the rate at which the market allows a consumer to trade one good for another.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

When price of Good-Y (shown on Y-axis) rises:

  1. price line shifts to the right

  2. price line shifts to the left

  3. price line rotates to the right

  4. price line rotates to the left
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the price of Good-Y rises, the consumer can afford less of it, causing the Y-intercept of the budget line to move closer to the origin. This results in the budget line rotating inward toward the origin, which is described as rotating to the left.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Any point above the consumer's equilibrium point is desirable but is not attainable because ________.

  1. income and prices are given

  2. taste and income and given

  3. preference and prices are given

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

Points outside the budget line are unattainable because they exceed the consumer's total budget. The budget is defined by the consumer's income and the market prices of the goods.