MCQ Questions Chapter 11 Government Budget and Economy Class 12 Economics

Please refer to MCQ Questions Chapter 11 Government Budget and Economy Class 12 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Economics issued for the current academic year. We have provided MCQ Questions for Class 12 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 11 Government Budget and Economy in Class 12 Economics provided below to get more marks in exams.

Chapter 11 Government Budget and Economy MCQ Questions

Please refer to the following Chapter 11 Government Budget and Economy MCQ Questions Class 12 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 11 Government Budget and Economy Class 12 Economics

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 

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 

Question: Which of the following are capital receipts of the government ?
(a) Recovery of loans 
(b) Borrowings 
(c) Disinvestment 
(d) 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   

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 

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 

Question: Which one of the following is indirect tax ?
a) Wealth tax 
b) Excise duty 
c) Income tax 
d) None of these 

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 

Question: Which of the following is a non- tax receipt ?
(a) Gift tax
(b) Sales tax 
(c) Gift and grants 
(d) Excise duty 

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   

Question. In which of the following ways, can deficit in budget be financed?
(a) Borrowing from RBI
(b) Borrowing from the public
(c) both (a) and (b)
(d) Neither (a) nor (b) 

Question. Which of the following is/are implication/s of fiscal deficit?
(a) Erosion of government credibility
(b) Inflationary spiral
(c) national debts for future generation
(d) none of these 

Question. Which of the following is a non-tax receipt?
(a) Gift tax
(b) sales tax
(c) donations
(d) Excise duty 

Question. A budget is a balanced one when:
(a) Total expenditure = Total receipts
(b) Total expenditure< Total receipts
(c) Total expenditure > Total receipts
(d) none of these 

Question. Surplus budget is that budget wherein:
(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 

Question. Fiscal Deficit=
(a) Total expenditure – Total receipts other than borrowing
(b) Revenue expenditure – Revenue receipts
(c) Capital expenditure Capital receipts
(d) Revenue expenditure + Capital expenditure – Revenue receipts

Question. Regressive tax is a tax which is :
(a)Charged at a 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)None of these 

Question. A tax, the burden of which can be shifted to others, is called:
(a) Indirect tax
(b) direct tax
(c) wealth tax
(d) none of these

Question.Tax, the impact of which lies on the person on whom it is legally imposed, is known as:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) none of these 

Question.Tax is imposed on value added at the various stages of production is known as:
(a) Corporate profit tax
(b) direct personal tax
(c) value added tax
(d) none of these 

Question.Taxes like wealth and gift tax in India which carry their significance in terms of revenue yield are called:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) paper taxes 

Question. Which of the following is a non-tax receipt?
(a) Fees
(b) Fines
(c) gift tax
(d) grants and donations

Question. Which of the following is a part of the revenue expenditure in the Indian Government budget
(a) Interest payments
(b) Defence purchases all of these
(c) Wage bill of the government
(d) all of these 

Question. Which of the following is an indirect tax?
(a) Wealth tax
(b) Excise tax
(c) income tax
(d) none of these 

Question, Which of the following are capital receipts of the government?
(a) Recovery of loans
(b) Borrowings
(c) Disinvestment
(d) All of these

Question. In the context of government budget, which of the following statements is correct?
(a) Budget is a statement of expected annual receipts and expenditures of the government
(b) It is the 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 five year plans
(d) It indicates BoP status of the domestic economy

Question. Which of the following are the objectives of government budget?
(a) Redistribution of income wealth
(b) Economic stability
( c) GDP growth
(d) all of these 

Question. Capital expenditure is that estimated expenditure of the government by which:
(a) assets are increased
(b) liability is decreased
(c)both (a) and (b)
(d) assets and liabilities do not change

Question. Which of the following is a direct tax?
(a) income tax
(b)Excise tax
(c) sales tax
(d) custom duty 

Question.Capital receipt is that receipt of the government which:
(a) creates a liability
(b) reduces the assets
(c) both (a) and (b)
(d) neither la) nor (b)

Question. The difference between fiscal deficit and interest payment is called:
(a) revenue deficit
(b) primary deficit
(c) budget deficit
(d) capital deficit 

Question. If primary deficit is ₹ 6,900 and interest payment is ₹600, then fiscal deficit is:
(a) ₹ 6,300
(b )₹ 7,500
(c) ₹ 27.400
(d) ₹ 7.300 

Question. Progressive tax is a tax which is :
(a) Charged at a decreasing rate when income of the individual increases
(b) Charged at a increasing rate when income of the individual increases
(c) A fixed percentage of an individual income
(d) None of these 

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

Question. Identify which of the following statements is true:-
(a) The difference between planned revenue expenditure and planned revenue receipts are called fiscal deficit
(b) The difference between total planned expenditure and total planned receipts is called a fiscal deficit.
(c) The sum of primary deficit and interest payment is called a fiscal deficit. 
d) The difference between total planned receipts and interest payment is called a primary deficit.

Question. ________ deficit includes interest payment by the Government on the past loans.
(a) Fiscal deficit
(b) Revenue deficit
(c) Primary deficit
d) Budgetary deficit

Question. A Government budget is prepared for a fiscal year running from:
(a) 1st January to 31st December
(b) 1st April to 31st December
(c) 1st April to 31st March
d) 1st January to 30th April

Question. Following are the impacts of the government budget on the economy excluding
(a) brings aggregate fiscal indiscipline level 
(b) implement government welfare programs
(c) brings better allocation of resources
d) better access to public goods

Question. Purchase of shares is related to:
(a) Revenue receipt
(b) Revenue expenditure
(c) capital receipt
(d) capital expenditure

Question. Interest income is a part of:
(a) Non-tax Revenue
(b) Revenue Receipts
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Question. The Government, under Ujjwala Yojana, is providing free LPG kitchen gas connections to the families below the poverty line. What objective the government is trying to fulfill through the government budget?
(a) Reduction in income inequalities 
(b) Allocation of resources 
(c) Price stability
(d) Economic growth

Question. Capital expenditure is the estimated expenditure of the government by which:
(a) Assets are increased
(b) liability is decreased
(c) both (a) and (b)
d) assets and liabilities do not change

Question. The government plans to impose high taxes on tobacco products. The main objectivs of government here is:
(a) Redistribution of income
(b) Economic stability
(c) Reallocation of resources
d) Direct participation

Question. Which of the following is a non-debt creating capital receipt?
(a) Borrowing from public 
(b) Recovery of loan
(c) Borrowings from foreign monetary authorities
d) None of these

Question. Which of the following is an example of capital expenditure in a government budget? 
(a) Grants to state governments
(b) Purchase of cranes for the construction of flyovers 
(c) Payment of salaries to staff of government hospitals
d) Defence services expenditure

Question. Gift tax is a paper tax because:
(a) it is an indirect tax
(b) it is a direct tax
(c) it does not have a significant revenue yield
d) both (b) and (c)

Question. Loans to state governments by the Central government is ________ for the Central government.
(a) Capital Expenditure 
(b) Revenue Expenditure
(c) Revenue Receipt
d) Capital Receipt

Question. To control inflation in the economy. What should be government do?
(a) Increase taxes, Increase Expenditure
(b) Decrease taxes, decrease expenditure
(c) Increase taxes, decrease expenditure
d) Decrease taxes, increase expenditure

Question. Which of the following statement is true? 
(a) Loans from IMF is a revenue receipt
(b) There can be fiscal deficit in government budget without revenue deficit
(c) Revenue deficit is the excess of capital receipts over the revenue receipts
(d) Grants given by the centre to state government is an example of capital expenditure.

Question. Two characteristic features of public goods are:   
(a) rivalrous and excludable
(b) non- rivalrous and non- excludable
(c) rivalrous and non-excludable
(d) non-rivalrous and excludable

Question. Identify the correct statement: 
(a) Government budget shows the actual receipts and actual expenditure of the government during a fiscal year
(b) During deflation, government will increase its budget expenditure and give tax concessions and subsidies
(c) Fiscal deficit is necessarily inflationary in nature
(d) Revenue deficit can be financed through taxes

Question. ___________deficit includes interest payments on past loan. 
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Both revenue and fiscal deficit

Question. Which one of the following is a revenue expenditure? 
(a)Purchases of shares
(b) Loans advanced
(c) Payment of salaries
(d) Expenditure on acquisition of land

Question. Government can reduce revenue deficit by: 
(a) reducing administrative expenses
(b) reducing subsidies
(c) increasing taxation
(d) all of the above

Question. If fiscal deficit is worth ₹30,000 crore and interest payment amounts to ₹8000 crores, primary deficit will be:
(a) ₹38,000
(b) ₹22,000
(c) ₹30,000
d) ₹46,000

Assertion-Reasoning Questions :

Question. Assertion(A): Direct taxes levied by the government are revenue receipts. 
Reason(R): Direct taxes refer to taxes that are imposed on property and income of individuals and companies and are paid directly by them to the government.
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation of Assertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of Assertion(A).
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true.

Question.  Assertion(A): Government imposes higher tax on rich and provides subsidies to poor. 
Reason(R): Government reduces inequalities in income and wealth through its budget.
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation ofAssertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of  Assertion(A).
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true.

Question. Assertion(A): Repayment of borrowings is a capital expenditure.
Reason(R): Capital expenditure reduces liabilities of the government. 
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation of Assertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of Assertion(A).
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true.

Question. Assertion(A): Interest received on loan given by the Central Government to state government is a revenue receipt.
Reason(R): Revenue receipts neither create any liability nor reduces assets of the government. 
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation of Assertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of Assertion(A)
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true.

Question. Assertion(A): Primary deficit is the difference between fiscal deficit and interest payments made by the government.
Reason(R): Primary deficit indicates borrowing requirements of the government. 
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation of Assertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of Assertion(A).
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true.

Question. Assertion(A): Government discourages production of harmful products through heavy taxes and encourages production of socially useful goods like Khadi by providing subsidies.
Reason(R): Government reallocates resources in accordance with the economic and social priorities of the country. 
Alternatives:
(a) Both Assertion(A) and Reason(R) are true and Reason(R) is the correct explanation of Assertion(A).
(b) Both Assertion(A) and Reason(R) are true and Reason(R) is not the correct explanation of Assertion(A).
(c) Assertion(A) is true but Reason(R) is false.
(d) Assertion(A) is false but Reason(R) is true

Question. Assertion ((a): The government budget is an annual estimated statement of revenue and expenditure during the coming fiscal year. 
Reason (R): Through the government budget, it tries to reduce the regional variations.
Alternatives:
(a) Both Assertion ((a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion ((a).
(b) Both Assertion ((a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion ((a).
(c) Assertion ((a) is true but Reason (R) is False
d) Assertion ((a) is False but Reason (R) is true.

Question. Assertion ((a): Government should reduce subsidies to curb the revenue deficit.
Reason (R): Providing subsidies on an LPG cylinder is a part of revenue expenditure.
Alternatives:
(a) Both Assertion ((a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion ((a).
(b) Both Assertion ((a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion ((a).
(c) Assertion ((a) is true but Reason (R) is False
d) Assertion ((a) is False but Reason (R) is true.

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