CBSE Class 12 Economics Government Budget and The Economy MCQs

Refer to CBSE Class 12 Economics Government Budget and The Economy MCQs provided below available for download in Pdf. The MCQ Questions for Class 12 Economics with answers are aligned as per the latest syllabus and exam pattern suggested by CBSE, NCERT and KVS. Multiple Choice Questions for Chapter 5 Government Budget and The Economy are an important part of exams for Class 12 Economics and if practiced properly can help you to improve your understanding and get higher marks. Refer to more Chapter-wise MCQs for CBSE Class 12 Economics and also download more latest study material for all subjects

MCQ for Class 12 Economics Chapter 5 Government Budget and The Economy

Class 12 Economics students should refer to the following multiple-choice questions with answers for Chapter 5 Government Budget and The Economy in Class 12.

Chapter 5 Government Budget and The Economy MCQ Questions Class 12 Economics with Answers

Question :  In the context of government budget, which of the following statements is correct ?

a) Budget is a statement of expected annual receipts and expenditure is correct?

b) It is a detail of actual receipts and expenditures of the government in a financial year

c) It offers a detailed description of achievements of the government during the 5 year plans

d) It indicates  BoP status of the economy

Answer :  Budget is a statement of expected annual receipts and expenditure is correct?

 

Question :  Which of the following are the objectives of government budget ?

a) Redistribution of income and wealth

b) Economy stability 

c) Both (a) and (b) 

d) None of these

Answer :  Both (a) and (b) 

 

Question :  Which of the following is a non- tax receipt ?

a) Gift tax

b) Sales tax 

c) Gift and grants         

d) Excise duty

Answer :  Gift and grants    

     

Question :  Regressive tax is that which is :

a) Charged at an increasing rate when income of the individual increases 

b) Charged at a decreasing rate when income of the individual increases

c) Relatively a low percentage of an individual’s income

d) A fixed percentage of an individual’s income

Answer :  Charged at a decreasing rate when income of the individual increases

 

Question :  Which one of the following is indirect tax ?

a) Wealth tax

b) Excise duty

c) Income tax 

d) None of these

Answer :  Excise duty

 

Question :  Which of the following are capital receipts of the government ?

a) Recovery of loans

b) Borrowings

c) Disinvestment 

d) All of these

Answer :  All of these

 

Question :  Capital expenditure is that estimated expenditure of the government which?

a) Assets are increased 

b) liability is decreased 

c) Both (a) and (b) 

d) Assets and liabilities do not change

Answer :  Both (a) and (b) 

 

Question :  Deficit budget refers to that situation in which government’s budget expenditure is :

a) less than its budget receipts 

b) More than its budget receipts 

c) Equal to its budget receipts 

d) None of these

Answer :  More than its budget receipts 

Question :  Fiscal deficit=

a) Total expenditure – total receipt other than borrowing

b) Revenue expenditure- revenue receipts

c) Capital expenditure – capital receipts

d) Revenue expenditure + Capital expenditure - revenue receipts

Answer :  Total expenditure – total receipt other than borrowing

 

Question :  Surplus budget is that budget where in :

a) Estimated revenue of the government < estimated expenditure of the government

b) Estimated revenue of the government > estimated expenditure of the government

c) Estimated revenue of the government = estimated expenditure of the government

d) None of these

Answer :   Estimated revenue of the government > estimated expenditure of the government

 

Question : Which of the following is the capital expenditure of the government?
(a) Interest Payment
(b) Purchase of House
(c) Expenses on Machinery
(d) All of the above
Answer: (a) Interest Payment

Question : When government spends more than it collects by way of revenue, it incurs ______
(A) Budget surplus
(B) Budget deficit
(C) Capital expenditure
(D) Revenue expenditure
Answer: (B) Budget deficit

Question : Which of the following statement is true?
(a) Fiscal deficit is the difference between total expenditure and total receipts
(b) Primary deficit is the difference between total receipt and interest payments
(c) Fiscal deficit is the sum of primary deficit and interest payment
(d) All of these
Answer: (c) Fiscal deficit is the sum of primary deficit and interest payment

Question : Which is included in the Direct Tax?
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) Excise Duty
Answer: (c) Both (a) and (b)

Question : The fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding ______
(A) Interest
(B) Taxes
(C) Spending
(D) Borrowings
Answer: (D) Borrowings

Question : Which is included in Indirect Tax?
(a) Excise Duty
(b) Sales Tax
(c) Both (a) and (b)
(d) Wealth Tax
Answer: (c) Both (a) and (b)

Question : What is the annual statement of the government’s fiscal revenue and fiscal expenditure known?
(A) Budget
(B) Fiscal Budget
(C) Capital Budget
(D) All of these
Answer: (B) Fiscal Budget

Question : An annual statement of the estimated receipts and expenditure of the government over the fiscal year is known as
(A) Budget
(B) Income estimates
(C) Account
(D) Expenditure
Answer: (A) Budget

Question : How many types of revenue receipts are there?
(A) 2
(B) 3
(C) 4
(D) 6
Answer: (A) 2

Question : Who issues 1 rupee note in India:
(a) Reserve Bank of India
(b) Finance Ministry of India
(c) State Bank of India
(d) None of these
Answer: (b) Finance Ministry of India

Question : The amount collected by the government as taxes and duties is known as _______
(A) Capital receipts
(B) Tax revenue receipts
(C) Non-tax revenue receipts
(D) All of these
Answer: (B) Tax revenue receipts

Question : Which is included in indirect tax?
(a) Income tax
(b) Wealth tax
(c) Excise Duty
(d) Gift tax
Answer: (c) Excise Duty

Question : The amount collected by the government in the form of interest, fees, and dividends is known as…….
(A) Tax-revenue receipts
(B) Capital receipts
(C) Non-tax revenue receipts
(D) None of these
Answer: (C) Non-tax revenue receipts

Question : Direct tax is called direct because it is collected directly from:
(A) The producers on goods produced
(B) The sellers on goods sold
(C) The buyers of goods
(D) The income earners
Answer: (D) The income earners

Question : Which objectives government attempts to obtain by Budget
(a) To Promote Economic Development
(b) Balanced Regional Development
(c) Redistribution of Income and Wealth
(d) All the above
Answer: (d) All the above

Question : Which of the following is an example of direct tax?
(A) VAT
(B) Excise duty
(C) Entertainment tax
(D) Wealth tax
Answer: (D) Wealth tax

Question : Which is a component of the Budget Receipt?
(a) Revenue Receipt
(b) Capital Receipt
(c) Both (a) and (b)
(d) None of the above
Answer: (c) Both (a) and (b)

Question : Which of the following is the component of a budget?
(A) Fiscal budget
(B) Capital budget
(C) Both of these
(D) None of these
Answer: (C) Both of these

Question : Tax revenue of the Government includes :
(a) Income Tax
(b) Corporate Tax
(c) Excise Duty
(d) All of these
Answer: (d) All of these

Question : Budget speech in Lok Sabha is given by:
(a) President
(b) Prime Minister
(c) Finance Minister
(d) Home Minister
Answer: (c) Finance Minister

Question : The expenditures which do not create assets for the government is called :
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Both (a) and (b)
(d) None of the above
Answer: (a) Revenue Expenditure

Question : What is the period of a fiscal year?
(A) 1 April to 31 March
(B) 1 January to 31 December
(C) 1 March to 28 February
(D) None of these
Answer: (A) 1 April to 31 March

Question : Direct tax is :
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) None of these
Answer: (c) Both (a) and (b)

Question : Which of the following is not a revenue receipt?
(a) Recovery of Loans
(b) Foreign Grants
(c) Profits of Public Enterprise
(d) Wealth Tax
Answer: (a) Recovery of Loans

Question : From the following which is included in the direct tax:
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) Excise Tax
Answer: (c) Both (a) and (b)

Question : In India, one rupee note is issued by:
(a) Reserve Bank of India
(b) Finance Ministry of Government of India
(c) State Bank of India
(d) None of these
Answer: (b) Finance Ministry of Government of India

Question : The non-tax revenue in the following is:
(A) Export duty
(B) Import duty
(C) Dividends
(D) Excise
Answer: (C) Dividends

Question : Capital budget consist of:
(a) Revenue Receipts and Revenue Expenditure
(b) Capital Receipts and Capital Expenditure
(c) Direct and Indirect Tax
(d) None of these
Answer: (b) Capital Receipts and Capital Expenditure

Question : Financial Year in India is:
(a) April I to March 31
(b) January 1 to December 31
(c) October 1 to September 30
(d) None of the above
Answer: (a) April I to March 31

Question : Which of the following is an indirect tax?
(a) Excise Duty
(b) Sales Tax
(c) Custom Duty
(d) All of these
Answer: (d) All of these

Question : Borrowing in the government budget is:
(A) Revenue deficit
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes
Answer: (B) Fiscal deficit

Question : What is the duration of a Budget?
(a) Annual
(b) Two Years
(c) Five Years
(d) Ten Years
Answer: (a) Annual

Question : Which of the following is included in fiscal policy?
(a) Public Expenditure
(b) Tax
(c) Public Debt
(d) All of these
Answer: (d) All of these

Question : The budget may include:
(a) Revenue Deficit
(b) Fiscal Deficit
(c) Primary Deficit
(d) All of these
Answer: (d) All of these

Question : Budget:
(a) is a description of income-expenditure of government
(b) is a document of the economic policy of the government
(c) is a description of non-programs of the government
(d) All of these
Answer: (d) All of these

Question : In an unbalanced budget:
(a) Income is greater than expenditure
(b) Expenditure is higher relative to income
(c) Deficit is covered by loans or printing of notes
(d) Only (b) and (c)
Answer: (d) Only (b) and (c)

Question : Which one of the following is a pair of direct tax?
(a) Excise duty and Wealth Tax
(b) Service Tax and Income Tax
(c) Excise Duty and Service Tax
(d) Wealth Tax and Income Tax
Answer: (d) Wealth Tax and Income Tax

Question : Which of the following is a correct measure of the primary deficit?
(a) Fiscal deficit minus revenue deficit
(b) Revenue deficit minus interest payments
(c) Fiscal deficit minus interest payments
(d) Capital expenditure minus revenue expenditure
Answer: (c) Fiscal deficit minus interest payments

Question : The primary deficit in a government budget will be zero, when _______
(A) Revenue deficit is zero
(B) Net interest payments are zero
(C) Fiscal deficit is zero
(D) Fiscal deficit is equal to interest payment
Answer: (D) Fiscal deficit is equal to interest payment

Question : The duration of the Government budget is:
(a) 5 years
(b) 2 years
(c) 1 year
(d) 10 years
Answer: (c) 1 year

Question : Budget is presented in the Parliament by:
(a) Prime Minister
(b) Home Minister
(c) Finance Minister
(d) Defence Minister
Answer: (c) Finance Minister

Question : Which of the following budget is suitable for developing economies?
(a) Deficit Budget
(b) Balanced Budget
(c) Surplus Budget
(d) None of these
Answer: (a) Deficit Budget

Question : Professional tax is imposed by:
(a) Central Government
(b) State Government
(c) Municipal Corporation
(d) Gram Panchayat
Answer: (b) State Government

Question : Which type of expenditure is made in bridge construction?
(a) Capital Expenditure
(b) Revenue Expenditure
(c) Both (a) and (b)
(d) None of the above
Answer: (a) Capital Expenditure

 

Fill in the blanks:

Question : __________ is a document containing income and expenditure of the government.
Answer: Budget

Question  _______ tax is that in which the final burden of the tax fall on the person who pays it.
Answer: Direct

Question : Service tax is levied by the ________
Answer: Central

Question Tax is a legally compulsory payment imposed by the _______ on income and property of persons and companies.
Answer: Government

Question : Finance bill contains _________ proposals.
Answer: Tax

Question : Primary Deficit = Fiscal Deficit minus __________
Answer: Interest on Debt

Question The government can influence the allocation of resources through the implementation of appropriate _________
Answer: fiscal policy

Question : Recovery of loan is treated as capital receipt because it leads to __________
Answer: reduction of assets

Question : Income tax is _________ tax.
Answer: Direct

Question : A deficit budget is that in which total expenditure is ________ total receipts.
Answer: greater than

Question : _________ tax is levied on the value of the goods.
Answer: Advalorem

Question : _________ budget is considered good for the country.
Answer: Deficit

Question  ________ are levied on goods and services.
Answer: Indirect taxes

Question : Government budget is presented on the last day of _________
Answer: February

Question : Revenue deficit is that in which revenue receipts are ________ revenue expenditure.
Answer: less than

Question : _________ does not have any impact on the asset-liability status of the government.
Answer: Revenue budget

 

State true or false :

Question : Grants by the government are treated as revenue expenditure.
Answer: True

Question : The three functions of allocation, redistribution, and stabilization are operated through the expenditure and receipts of the government.
Answer: True

Question : During deflation surplus budget is made.
Answer: True

Question : The deficit decreases in a recession and increases in a boom, even without any change in fiscal policy.
Answer: False

Question : Electricity tax is levied by the State Government.
Answer: True

Question : Payment of salaries to the government employees is a capital payment.
Answer: False

Question : The rail budget is generally not included in the annual budget.
Answer: True

Question : Public borrowing is a capital receipt.
Answer: True

Question : There is a feasible way of excluding anyone from enjoying the benefits of public goods.
Answer: False

Question : Recovery of loan is a revenue receipt.
Answer: False

Question : Service tax is a direct tax.
Answer: False

Question : Public goods are collectively consumed.
Answer: True

Question : Indirect taxes are not convenient to realise.
Answer: False

Question A deficit budget is not considered a good budget.
Answer: False

Question : Expenditure made on the establishment of the metro rail line in Delhi is a capital expenditure.
Answer: True

Question The budget speech is given by the Finance Minister.
Answer: True

Question : Excess of capital expenditure over capital receipt is called revenue deficit.
Answer: False

Question : Central excise duty is a direct tax.
Answer: False

Question : The interest payment is a planned item.
Answer: False

ASSERTION AND REASON BASED QUESTIONS

Question : Read the following statement
Assertion (A): Cigarettes and Whisky are discouraged through heavy taxation.
Reason (R): These are ‘socially useful goods'
a. Both Assertion (A) and Reason (R) are true,
b. Both Assertion (A) and Reason (R) are false.
c. Assertion (A) is true and Reason (R) is false.
d. Assertion (A) is false and Reason (R) is true.
Answer: C

Question : Assertion (A): borrowings are capital receipts but payment of interest on borrowings are revenue expenditure.
Reason (R):borrowings creates liability but payment of interest does not reduce liability.
a) Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).
b) Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).
c) Assertion (A) is true and Reason (R) is false.
d) Assertion (A) is false and Reason (R) is true.
Answer: A

Question : Assertion (A): GST is an indirect tax.
Reason (R): because it is imposed on goods and services.
a) Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).
b) Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).
c) Assertion (A) is true and Reason (R) is false.
d) Assertion (A) is false and Reason (R) is true.
Answer: A

Question : Assertion (A): Fiscal deficit refers to total borrowings of government during a financial year.
Reason (R): fiscal deficit creates burden on future generations.
a) Both Assertion (A) and Reason (R) are true, (R) is correct explanation of (A).
b) Both Assertion (A) and Reason (R) are true but (R) is not correct explanation of (A).
c) Assertion (A) is true and Reason (R) is false.
d) Assertion (A) is false and Reason (R) is true.
Answer: B

CASE STUDY BASE QUESTIONS

CASE STUDY

Read the following hypothetical text and answer the given questions: -
GDP growth is the central objective of government budgetary policy. It is achieved in two ways: (i) by making public investment expenditure, and (ii) by inducing private investment expenditure (through tax rebates and subsidies).
Allocation of Resources: Private enterprises will always desire to allocate resources to those areas of production where profits are high. However, it is possible that such areas of production (like production of alcohol) may not promote social welfare. Through its budgetary policy, the government of a country directs the allocation of resources in a manner such that there is a balance between the goals of profit maximisation and social welfare. Production of goods which are injurious to health (like Cigarettes and Whisky) is discouraged through heavy taxation. On the other hand, production of 'socially useful goods' (like, 'Khadi') is encouraged through subsidies.

Question : Public enterprises will always desire to allocate resources to those areas of production, where: -
a. Profits are high
b. Cost is low
c. Social welfare is high
d. Revenue is high
Answer: C

Question : Suitable title for the passage
a. GDP
b. Private enterprises
c. Subsidies
d. Government Budget

Answer: C

Question : GDP growth is the central objective of government budgetary policy.
a. True
b. False
Answer: A

CASE STUDY

Read the following hypothetical text and answer the given questions: -

Public expenditure accelerates the pace of GDP growth. Higher rate of GDP growth is achieved through (a) investment expenditure in public sector enterprises, (b) capital grants by the government for the purchase of capital equipment, (c) subsidies for the purchase of inputs, and (d) purchase of farm output at the minimum support price. Public expenditure promotes equality in the distribution of income and wealth. This is achieved by offering old-age pensions, as well as by providing free food, education, and health services to the Below Poverty Line Population.
Public expenditure plays a significant role in restoring economic stability. Particularly, when the economy is battling economic recession. The government expenditure (consumption expenditure as well as investment expenditure) raises the level of AD. Only when AD is raised that the vicious circle of economic recession is broken. Public expenditure generates investment-friendly environment in the economy. The government spends money on infrastructural development. It constructs roads, dams, bridges. It
introduces faster and convenient means of transportation. Such facilities promote inducement to investment. Briefly, public expenditure is indispensable in any welfare state like India. It not only promotes GDP growth, but also promotes social welfare.

Question : The construction of roads, dams, bridges is called
a. Social development
b. Infrastructure development
c. Industrial development
d. Agrarian development
Answer: B

Question : Read the following statement
Assertion (A): Public expenditure generates investment-friendly environment in the economy.
Reason (R): It raises the infrastructural development in the economy.
a. Both Assertion (A) and Reason (R) are true.
b. Both Assertion (A) and Reason (R) are false.
c. Assertion (A) is true and Reason (R) is false.
d. Assertion (A) is false and Reason (R) is true.
Answer: A

Question : The government expenditure does not raise the level of AD
a. True
b. False
Answer: B

Question : Which is included in the non- transfer income
a. Old age pension
b. Subsidies
c. Retirement pension
d. Scholarship
Answer: C

Part A Microeconomics Chapter 01 Introduction to Micro Economics
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Part A Microeconomics Chapter 04 The Theory of Firm Under Perfect Competition
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Part A Microeconomics Chapter 05 Market Equilibrium
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Part A Microeconomics Chapter 06 Non Competitive Markets
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Part B Macroeconomics Chapter 01 Introduction to Macroeconomics
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Part B Macroeconomics Chapter 03 Money and Banking
CBSE Class 12 Economics Money and Banking MCQs
Part B Macroeconomics Chapter 04 Determination of Income and Employment
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Part B Macroeconomics Chapter 05 Government Budget and Economy
CBSE Class 12 Economics Government Budget and The Economy MCQs

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