12TH CBSE ECO Government Budget and the Economy – 75 MCQS QUIZ

Government Budget and the Economy – MCQ Tests

5 Tests × 15 Questions = 75 MCQs

CBSE Class 12 Economics

Test 1 – 15 Questions

1. A government budget is best described as:

A) A statement of estimated government receipts and expenditures for a yearB) A statement of only tax collectionsC) A statement of only government borrowingsD) A statement of private-sector income

Correct Answer: A) A statement of estimated government receipts and expenditures for a year

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2. Which authority is identified in the source as the agent and adviser to the Government of India?

A) SEBIB) Reserve Bank of India (RBI)C) NITI AayogD) Finance Commission

Correct Answer: B) Reserve Bank of India (RBI)

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3. What is a tax?

A) A voluntary donation to governmentB) A legally compulsory payment imposed by governmentC) A loan given to governmentD) A payment made only for a specific service

Correct Answer: B) A legally compulsory payment imposed by government

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4. Which of the following is a non-tax revenue receipt?

A) Income taxB) GSTC) FeesD) Corporate tax

Correct Answer: C) Fees

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5. Revenue deficit is the excess of:

A) Revenue expenditure over revenue receiptsB) Capital expenditure over capital receiptsC) Borrowings over tax revenueD) Total receipts over total expenditure

Correct Answer: A) Revenue expenditure over revenue receipts

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6. Which formula represents revenue deficit?

A) Revenue receipts − Revenue expenditureB) Revenue expenditure − Revenue receiptsC) Total receipts − Capital expenditureD) Borrowings − Interest payments

Correct Answer: B) Revenue expenditure − Revenue receipts

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7. Which formula represents primary deficit?

A) Fiscal deficit + interest paymentsB) Fiscal deficit − interest paymentsC) Revenue deficit − tax revenueD) Total expenditure − capital receipts

Correct Answer: B) Fiscal deficit − interest payments

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8. Fiscal deficit broadly represents:

A) Excess of total expenditure over total receipts excluding borrowingsB) Excess of tax revenue over expenditureC) Excess of revenue receipts over revenue expenditureD) Only interest payments

Correct Answer: A) Excess of total expenditure over total receipts excluding borrowings

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9. Why is repayment of a government loan treated as capital expenditure?

A) It creates a new assetB) It reduces the government's liabilityC) It increases tax revenueD) It is always a revenue receipt

Correct Answer: B) It reduces the government's liability

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10. Which is a capital receipt of the government?

A) Tax revenueB) FeesC) Recovery of loansD) Interest on loans received

Correct Answer: C) Recovery of loans

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11. Which expenditure generally creates assets or reduces government liabilities?

A) Revenue expenditureB) Capital expenditureC) Administrative revenueD) Subsidy only

Correct Answer: B) Capital expenditure

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12. Which expenditure neither creates assets nor reduces liabilities?

A) Capital expenditureB) Revenue expenditureC) Recovery of loansD) Disinvestment

Correct Answer: B) Revenue expenditure

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13. Which of the following is an example of a direct tax?

A) GSTB) VATC) Personal income taxD) Excise duty

Correct Answer: C) Personal income tax

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14. Which statement about direct tax is correct?

A) Its burden can normally be shifted to another personB) Its impact and incidence fall on the same personC) It is always a tax on goodsD) It is always an indirect tax

Correct Answer: B) Its impact and incidence fall on the same person

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15. Which is an example of an indirect tax?

A) Income taxB) Wealth taxC) Corporation taxD) GST

Correct Answer: D) GST

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Test 2 – 15 Questions

1. What is a balanced budget?

A) Estimated receipts are greater than estimated expenditureB) Estimated receipts are equal to estimated expenditureC) Estimated expenditure is always zeroD) Borrowings are equal to tax revenue

Correct Answer: B) Estimated receipts are equal to estimated expenditure

More practice: CBSE Class 12 Economics

2. What is a surplus budget?

A) Estimated receipts are greater than estimated expenditureB) Estimated receipts are less than estimated expenditureC) Receipts and expenditure are equalD) There are no capital receipts

Correct Answer: A) Estimated receipts are greater than estimated expenditure

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3. A deficit budget exists when:

A) Estimated receipts are greater than expenditureB) Estimated receipts are less than expenditureC) Tax revenue is zeroD) Capital receipts are zero

Correct Answer: B) Estimated receipts are less than expenditure

More practice: CBSE Class 12 All Subjects Study Materials

4. Which budget may be useful during periods of high inflation according to the source?

A) Surplus budgetB) Deficit budgetC) Balanced budget onlyD) Zero-based budget

Correct Answer: A) Surplus budget

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5. What is the duration of a normal government budget year mentioned in the source?

A) Six monthsB) Nine monthsC) Twelve monthsD) Fifteen months

Correct Answer: C) Twelve months

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6. The central budget is generally presented by the:

A) Prime MinisterB) Finance MinisterC) RBI GovernorD) President alone

Correct Answer: B) Finance Minister

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7. According to the source, the budget is presented on:

A) 1 JanuaryB) 1 FebruaryC) 1 MarchD) 31 March

Correct Answer: B) 1 February

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8. Which Article of the Constitution is identified as dealing with the budget?

A) Article 110B) Article 111C) Article 112D) Article 113

Correct Answer: C) Article 112

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9. The two main components of a government budget identified in the source are:

A) Revenue budget and capital budgetB) Tax budget and subsidy budgetC) Trade budget and money budgetD) Import budget and export budget

Correct Answer: A) Revenue budget and capital budget

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10. A revenue budget contains details of:

A) Revenue receipts and revenue expenditureB) Only borrowingsC) Only capital expenditureD) Only disinvestment

Correct Answer: A) Revenue receipts and revenue expenditure

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11. A capital budget contains details of:

A) Revenue receipts and revenue expenditureB) Capital receipts and capital expenditureC) Only taxesD) Only subsidies

Correct Answer: B) Capital receipts and capital expenditure

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12. Which receipt creates a liability or reduces an asset of the government?

A) Revenue receiptB) Capital receiptC) Tax receipt onlyD) Fee receipt only

Correct Answer: B) Capital receipt

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13. Which is an example of a debt-creating capital receipt?

A) Tax collectionB) BorrowingC) FeesD) Dividends received

Correct Answer: B) Borrowing

More practice: CBSE Class 12 Economics

14. Recovery of loans is a capital receipt because it:

A) Creates a liabilityB) Reduces government assetsC) Creates tax revenueD) Increases revenue expenditure

Correct Answer: B) Reduces government assets

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15. What is the significance of primary deficit?

A) It measures borrowing requirements excluding interest paymentsB) It measures only tax revenueC) It equals revenue deficit plus interestD) It measures imports

Correct Answer: A) It measures borrowing requirements excluding interest payments

More practice: CBSE Class 12 All Subjects Study Materials

Test 3 – 15 Questions

1. If fiscal deficit is ₹9,000 crore and interest payments are ₹400 crore, primary deficit is:

A) ₹8,600 croreB) ₹9,400 croreC) ₹4,000 croreD) ₹400 crore

Correct Answer: A) ₹8,600 crore

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2. If revenue expenditure is ₹1,200 crore and revenue receipts are ₹1,000 crore, revenue deficit is:

A) ₹200 croreB) ₹1,000 croreC) ₹1,200 croreD) ₹2,200 crore

Correct Answer: A) ₹200 crore

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3. If fiscal deficit is ₹10,000 crore and interest payment is ₹8,000 crore, primary deficit is:

A) ₹18,000 croreB) ₹10,000 croreC) ₹2,000 croreD) ₹8,000 crore

Correct Answer: C) ₹2,000 crore

More practice: CBSE Class 12 Accountancy

4. If the government has a primary deficit of ₹10,000 crore and interest payment of ₹8,000 crore, fiscal deficit is:

A) ₹2,000 croreB) ₹8,000 croreC) ₹10,000 croreD) ₹18,000 crore

Correct Answer: D) ₹18,000 crore

More practice: CBSE Class 12 Economics

5. A large fiscal deficit implies:

A) A very small amount of borrowingB) A large amount of borrowingC) No borrowingD) Only tax reduction

Correct Answer: B) A large amount of borrowing

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6. What does zero primary deficit mean?

A) Fiscal deficit equals interest paymentsB) Revenue deficit is zeroC) Fiscal deficit is zeroD) Borrowings are zero

Correct Answer: A) Fiscal deficit equals interest payments

More practice: CBSE Class 12 All Subjects Study Materials

7. Fiscal deficit is commonly regarded as a measure of the government's:

A) Total borrowing requirementB) Total tax rateC) Export earningsD) Private investment

Correct Answer: A) Total borrowing requirement

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8. Revenue deficit gives a warning that the government may need to:

A) Increase or reduce expenditure to meet day-to-day expensesB) Stop collecting taxesC) Eliminate capital receiptsD) Stop all borrowing

Correct Answer: A) Increase or reduce expenditure to meet day-to-day expenses

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9. Which of the following can reduce revenue deficit according to the source?

A) Increase revenue receipts and reduce revenue expenditureB) Increase only borrowingsC) Reduce all capital receiptsD) Increase interest payments

Correct Answer: A) Increase revenue receipts and reduce revenue expenditure

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10. Which measure was suggested to control revenue deficit?

A) Increase taxationB) Increase administrative expenditureC) Reduce non-plan expenditure onlyD) Stop public goods

Correct Answer: A) Increase taxation

More practice: CBSE Class 12 Economics

11. A subsidy provided by the government to producers is classified as:

A) Capital expenditureB) Revenue expenditureC) Capital receiptD) Revenue receipt

Correct Answer: B) Revenue expenditure

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12. Payment of interest by the government is generally:

A) Revenue expenditureB) Capital expenditureC) Capital receiptD) Non-tax capital receipt

Correct Answer: A) Revenue expenditure

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13. Repayment of a government loan is:

A) Revenue receiptB) Capital expenditureC) Revenue expenditureD) Tax revenue

Correct Answer: B) Capital expenditure

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14. Borrowing by the government is:

A) Revenue receiptB) Capital receiptC) Revenue expenditureD) Tax expenditure

Correct Answer: B) Capital receipt

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15. Fiscal policy is mainly concerned with:

A) Public revenue, public expenditure and public debtB) Only banking regulationC) Only foreign tradeD) Only money supply

Correct Answer: A) Public revenue, public expenditure and public debt

More practice: CBSE Class 12 Accountancy

Test 4 – 15 Questions

1. The Fiscal Responsibility and Budget Management (FRBM) Act is associated with:

A) Fiscal discipline and management of public financesB) Foreign exchange regulation onlyC) Bank licensing onlyD) Consumer protection only

Correct Answer: A) Fiscal discipline and management of public finances

More practice: CBSE Class 12 Economics

2. Which objective of government budgeting increases equality in society?

A) Economic growth onlyB) Re-distribution of income and wealthC) Only allocation of resourcesD) Only foreign trade

Correct Answer: B) Re-distribution of income and wealth

More practice: CBSE Class 12 Business Studies

3. Which is an objective of government budget?

A) Provision of public goodsB) Increasing private monopoliesC) Eliminating all taxesD) Reducing all public services

Correct Answer: A) Provision of public goods

More practice: CBSE Class 12 All Subjects Study Materials

4. Government expenditure on construction of a school building is generally:

A) Revenue expenditureB) Capital expenditureC) Revenue receiptD) Non-tax receipt

Correct Answer: B) Capital expenditure

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5. Government expenditure on defence capital equipment is generally:

A) Capital expenditureB) Revenue receiptC) Tax expenditureD) Revenue deficit

Correct Answer: A) Capital expenditure

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6. Funds received from public through government securities are classified as:

A) Revenue receiptsB) Capital receiptsC) Revenue expenditureD) Subsidies

Correct Answer: B) Capital receipts

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7. Disinvestment refers to:

A) Sale of government stake in a public sector undertakingB) Collection of income taxC) Payment of salariesD) Recovery of loans

Correct Answer: A) Sale of government stake in a public sector undertaking

More practice: CBSE Class 12 Economics

8. What is GST according to the source?

A) Goods and Services TaxB) Government Sales TariffC) General Service TransferD) Goods Supply Tax

Correct Answer: A) Goods and Services Tax

More practice: CBSE Class 12 Business Studies

9. GST was implemented in India on:

A) 1 April 2016B) 1 July 2017C) 1 January 2018D) 1 April 2019

Correct Answer: B) 1 July 2017

More practice: CBSE Class 12 All Subjects Study Materials

10. Which taxes were subsumed under GST according to the source?

A) Only income taxB) Several indirect taxes such as excise duty, service tax and VATC) Only corporation taxD) Only wealth tax

Correct Answer: B) Several indirect taxes such as excise duty, service tax and VAT

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11. Which is a non-tax revenue source?

A) Interest received by governmentB) Income taxC) GSTD) Corporation tax

Correct Answer: A) Interest received by government

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12. Which is an example of non-tax revenue?

A) Dividends received by governmentB) Income taxC) Customs dutyD) GST

Correct Answer: A) Dividends received by government

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13. Which statement is correct about capital receipts?

A) They either create a liability or reduce an assetB) They never affect assets or liabilitiesC) They are always taxesD) They are always revenue expenditure

Correct Answer: A) They either create a liability or reduce an asset

More practice: CBSE Class 12 Economics

14. Which statement is correct about revenue receipts?

A) They neither create liabilities nor reduce government assetsB) They always create liabilitiesC) They always reduce assetsD) They are always borrowings

Correct Answer: A) They neither create liabilities nor reduce government assets

More practice: CBSE Class 12 Business Studies

15. Which receipt is classified as a revenue receipt?

A) Recovery of loansB) BorrowingC) Tax revenueD) Disinvestment

Correct Answer: C) Tax revenue

More practice: CBSE Class 12 All Subjects Study Materials

Test 5 – 15 Questions

1. Which type of budget has estimated government receipts greater than estimated expenditure?

A) Deficit budgetB) Balanced budgetC) Surplus budgetD) Capital budget

Correct Answer: C) Surplus budget

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2. Which receipt is classified as a revenue receipt?

A) Recovery of loansB) BorrowingC) Tax revenueD) Disinvestment

Correct Answer: C) Tax revenue

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3. Which type of budget has estimated receipts greater than estimated expenditure?

A) Deficit budgetB) Balanced budgetC) Surplus budgetD) Capital budget

Correct Answer: C) Surplus budget

More practice: CBSE Class 12 Accountancy

4. Which item is a non-debt creating capital receipt?

A) BorrowingB) Recovery of loansC) Tax revenueD) Disinvestment

Correct Answer: D) Disinvestment

More practice: CBSE Class 12 Economics

5. Which item is a debt-creating capital receipt?

A) GSTB) FeesC) BorrowingD) Dividends

Correct Answer: C) Borrowing

More practice: CBSE Class 12 Business Studies

6. What is the main purpose of fiscal policy?

A) Managing public revenue, expenditure and debtB) Managing only private investmentC) Managing only exportsD) Managing only bank deposits

Correct Answer: A) Managing public revenue, expenditure and debt

More practice: CBSE Class 12 All Subjects Study Materials

7. Which government objective relates to efficient allocation of resources?

A) Provision of public goodsB) Only debt repaymentC) Only tax collectionD) Only imports

Correct Answer: A) Provision of public goods

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8. Which budgetary objective is associated with economic stability?

A) Reducing all public expenditureB) Using budget policy to influence economic conditionsC) Eliminating all taxesD) Stopping government borrowing

Correct Answer: B) Using budget policy to influence economic conditions

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9. Which statement about government budget is correct?

A) It is an annual statement of estimated receipts and expendituresB) It contains only actual receiptsC) It contains only capital expenditureD) It contains only tax receipts

Correct Answer: A) It is an annual statement of estimated receipts and expenditures

More practice: CBSE Class 12 Accountancy

10. Which is an example of revenue expenditure?

A) Payment of interest on government debtB) Construction of a bridgeC) Purchase of metro coachesD) Recovery of loans

Correct Answer: A) Payment of interest on government debt

More practice: CBSE Class 12 Economics

11. Which is an example of capital expenditure?

A) Payment of government salariesB) Payment of interestC) Construction of a school buildingD) Payment of subsidies

Correct Answer: C) Construction of a school building

More practice: CBSE Class 12 Business Studies

12. Which statement about borrowing is correct?

A) Borrowing creates a liability for the governmentB) Borrowing is always revenue expenditureC) Borrowing reduces government assetsD) Borrowing is a tax

Correct Answer: A) Borrowing creates a liability for the government

More practice: CBSE Class 12 All Subjects Study Materials

13. Why are taxes treated as revenue receipts?

A) They neither create a liability nor reduce government assetsB) They always create a liabilityC) They always reduce assetsD) They are borrowings

Correct Answer: A) They neither create a liability nor reduce government assets

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14. Which tax has its impact and incidence on different persons?

A) Income taxB) Corporation taxC) GSTD) Wealth tax

Correct Answer: C) GST

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15. Which deficit equals fiscal deficit minus interest payments?

A) Revenue deficitB) Primary deficitC) Budget deficitD) Trade deficit

Correct Answer: B) Primary deficit

More practice: CBSE Class 12 Accountancy

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