Every question from this NCERT chapter, with a detailed explanation.
Consider the following statements regarding the "Annual Financial Statement" in India: 1. It is a statutory requirement under the Fiscal Responsibility and Budget Management Act, not the Constitution. 2. It includes estimates for the coming financial year. 3. It distinguishes between the revenue account and the capital account. Which of the statements given above is/are correct?
With reference to the "Allocation Function" of the government budget, consider the following statements: 1. It addresses the provision of public goods that cannot be provided effectively by the market mechanism. 2. Public goods are characterized by being rivalrous in consumption and excludable in nature. 3. The "free-rider" problem is easily solved by charging a user fee for public goods. Which of the statements given above is/are correct?
Consider the following statements regarding "Public Provision" and "Public Production": 1. Public provision implies that goods are financed through the budget and used without direct payment. 2. Goods provided by the government must necessarily be produced directly by the government. 3. Public goods may be produced by the private sector. Which of the statements given above is/are correct?
Consider the following statements regarding "Capital Receipts": 1. Recovery of loans is considered a revenue receipt. 2. Capital receipts either create a liability or reduce the financial assets of the government. 3. Market borrowings are considered non-debt creating capital receipts. Which of the statements given above is/are correct?
Consider the following statements regarding "Revenue Expenditure": 1. It includes expenditure that does not result in the creation of assets. 2. Interest payments on debt are classified as capital expenditure. 3. Grants given to state governments are treated as revenue expenditure even if they are meant for the creation of assets. Which of the statements given above is/are correct?
With reference to "Plan and Non-Plan Expenditure", consider the following statements: 1. Plan revenue expenditure was exclusively for the defence sector. 2. Non-plan expenditure covered a vast range of general, economic, and social services of the government. 3. Defence services and interest payments were major components of Non-Plan expenditure. Which of the statements given above is/are correct?
Consider the following statements regarding "Subsidies" in India: 1. They are an important policy instrument aimed at increasing welfare. 2. Implicit subsidies are those which are explicitly mentioned in the budget documents. 3. Defence expenditure is a form of explicit subsidy. Which of the statements given above is/are correct?
Consider the following statements regarding the "Revenue Deficit": 1. It refers to the excess of government’s revenue expenditure over revenue receipts. 2. It implies that the government is saving and investing in the economy. 3. A high revenue deficit forces the government to borrow to finance its consumption requirements. Which of the statements given above is/are correct?
With reference to the "Fiscal Deficit", consider the following statements: 1. It is the difference between the government’s total expenditure and its total receipts including borrowing. 2. It indicates the total borrowing requirements of the government from all sources. 3. Non-debt creating capital receipts are included in total receipts for calculating fiscal deficit. Which of the statements given above is/are correct?
Consider the following statements regarding the "Primary Deficit": 1. It includes the burden of past debt to show the total borrowing requirement. 2. It is calculated by subtracting interest payments from the fiscal deficit. 3. If the primary deficit is zero, the fiscal deficit is also zero. Which of the statements given above is/are correct?
Consider the following statements regarding the "Balanced Budget Multiplier": 1. It implies that an increase in government spending matched by an equal increase in taxes leads to an increase in income. 2. The value of the balanced budget multiplier is always zero. 3. It suggests that output increases by exactly the amount of the increase in government spending. Which of the statements given above is/are correct?
Consider the following statements regarding "Proportional Taxes": 1. Under this system, the government collects a fixed amount of tax regardless of income. 2. Proportional taxes reduce the slope of the consumption function. 3. They act as an automatic stabiliser for the economy. Which of the statements given above is/are correct?
Consider the following statements regarding "Discretionary Fiscal Policy": 1. It is synonymous with the automatic stabilising properties of the tax system. 2. It refers to deliberate government actions to stabilise the economy. 3. It relies solely on the market mechanism without any government intervention. Which of the statements given above is/are correct?
Which of the following statements correctly compares the effect of "Government Transfers" vs "Government Expenditure" on equilibrium income? 1. Government expenditure has a larger impact on equilibrium income than an equivalent amount of transfers. 2. Transfers affect income more than government expenditure because they are fully spent. 3. The multiplier for transfers is smaller than the government expenditure multiplier.
Consider the following statements regarding the "Burden of Debt": 1. Government debt held by its own citizens is considered more burdensome than external debt. 2. External debt involves a transfer of resources abroad for interest payments. 3. Future generations are burdened if government borrowing reduces capital formation and growth. Which of the statements given above is/are correct?
With reference to "Deficit Reduction" strategies in India, consider the following statements: 1. The government has relied more on indirect taxes than direct taxes to increase revenue. 2. Indirect taxes are considered progressive in nature. 3. Reducing government expenditure is a major thrust area for deficit reduction. Which of the statements given above is/are correct?
Consider the following statements regarding the "Fiscal Responsibility and Budget Management Act (FRBMA), 2003": 1. It mandates the central government to increase the fiscal deficit to 5 % of GDP. 2. It prohibits the central government from borrowing from the RBI except for temporary cash mismatches. 3. It allows actual deficits to exceed targets on grounds of national security or natural calamity. Which of the statements given above is/are correct?
Consider the following statements regarding the "Fiscal Deficit" and "Government Debt": 1. Fiscal deficits have no impact on the stock of government debt. 2. Fiscal deficit is a flow variable, while government debt is a stock variable. 3. Interest payments on accumulated debt are excluded from the current fiscal deficit. Which of the statements given above is/are correct?
With reference to the "FRBM Review Committee", consider the following statements: 1. It was set up to maintain the status quo of the 2003 Act without any changes. 2. It recommended a shift towards a debt-to-GDP ratio as the primary anchor. 3. It was tasked with keeping an eye on the future path of growth. Which of the statements given above is/are correct?
Consider the following statements regarding "Deficit Financing": 1. Government borrowing from the public increases the money supply directly. 2. Printing money is one way to finance the budget deficit. 3. Deficits can be financed by taxation. Which of the statements given above is/are correct?
Consider the following statements regarding the "Government Expenditure Multiplier": 1. It shows how much equilibrium output changes for a unit change in government spending. 2. Its value is always less than 1. 3. It is derived from the marginal propensity to consume. Which of the statements given above is/are correct?
Which of the following is an example of "Public Production"? 1. Government providing cash transfers to households for purchasing food. 2. It involves the government directly producing goods and services. 3. Government providing scholarships to students in private colleges.
With reference to the "Allocation Function", why are public goods not provided by the private sector? 1. They are non-excludable, leading to the free-rider problem. 2. They are rivalrous, making them profitable only for the government. 3. It is difficult to collect fees for their use. Which of the statements given above is/are correct?
Consider the following statements regarding "Personal Disposable Income": 1. It is the income earned by the government from its public sector undertakings. 2. The government affects it by making transfers and collecting taxes. 3. It is the part of private income available to households for consumption and saving. Which of the statements given above is/are correct?
With reference to "Deficit and the Business Cycle", consider the following statements: 1. Tax revenues tend to fall during a recession. 2. Fiscal deficits always decrease during a recession due to austerity measures. 3. Cyclical deficits occur due to automatic stabilizers during a downturn. Which of the statements given above is/are correct?