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1. 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

2. Which of the following is an example of direct tax?

(A) VAT
(B) Excise duty
(C) Entertainment tax
(D) Wealth tax

3. 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

4. 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

5. 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

6. Which of the following is the component of a budget?

(A) Fiscal budget
(B) Capital budget
(C) Both of these
(D) None of these

7. Which of the following statements is correct about government spending?

(A) When a government spends more than it can collect as revenue, it incurs a revenue expenditure

(B) When a government spends more than it can collect as revenue, it incurs a capital expenditure

(C) When a government spends more than it can collect as revenue, it incurs a budget deficit

(D) When a government spends more than it can collect as revenue, it incurs a budget surplus

8. Which of the following statements is true about the fiscal deficit?

(A) It is the difference between the total expenditure and receipts of a government excluding interest

(B) It is the difference between the total expenditure and receipts of a government excluding spending

(C) It is the difference between the total expenditure and receipts of a government excluding borrowings

(D) It is the difference between the total expenditure and receipts of a government excluding taxes

9. Which of the following statements is true about the primary deficit in a government’s budget?

(A) The primary deficit is zero when the revenue deficit is zero

(B) The primary deficit is zero when the net interest payments are zero

(C)  The primary deficit is zero when the fiscal deficit is zero

(D) The primary deficit is zero when the fiscal deficit is equal to the interest payment

10. Which of the following statements is correct about direct taxes?

(A) The direct taxes are collected from the income earners

(B) The direct taxes are collected from the producers on the goods or services produced by them

(C)  The direct taxes are collected from the sellers on the goods or services sold by them

(D) The direct taxes are collected from the buyers on the goods or services bought by them

11. What is the duration of a financial year?

(A) October 1st to September 30th

(B) April 1st to March 30th

(C)  January 1st to December 30th

(D) None of the above

12. Which of the following statements about the capital budget is accurate?

(A) The capital budget consists of direct and indirect tax

(B) The capital budget consists of capital expenditure and capital receipts

(C) The capital budget consists of revenue expenditure and revenue receipts

(D) The capital budget consists of direct taxes

13. Spot the Capital Receipt:

a) Tax Received
b) External grants received
c) Dividend received
d) Disinvestment

14. Spot the revenue receipt:-

a) Recovery of loans
b) Borrowings
c) External grants
d) Disinvestment

15. Fiscal deficit in a government budget refers to:-

a) Shortfall in taxes
b) Shortfall in disinvestment
c) Disinvestment requirement
d) Borrowings requirements

16. The primary deficit in a government budget refers to:-

a) Borrowing requirements
b) Interest payments requirements
c) (a) less (b)
d) (a) + (b)

17. Steps taken through the government budget can influence:-

a) Inequalities
b) Allocation of resources
c) Inflation
d) All the above

18. 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

19. Primary deficit in a government budget will be zero, when ______ 

1. Revenue deficit is zero     
2. Net interest payments are zero
3. Fiscal deficit is zero
4. Fiscal deficit is equal to interest payment

20. Which one of the following is not a capital expenditure?

1. Loans advanced by World Bank
2. Construction of school buildings
3. Repayment of loans
4. Purchase of Metro Coaches from Japan

21. Primary deficit is borrowing requirements of government for making

1. Interest payments.     
2. Other than interest payments. 
3. All types of payments. 
4. Some specific payments.

22. Fiscal deficit equals

1. Primary deficit minus interest payments.
2. Primary deficit plus interest payments. 
3. Total budget expenditure minus total budget receipts.
4. None of the above.  

23. Identify the correctly matched pair.   

1. (i) – (a)
2. (ii) – (b)
3. (iii) – (c)
4. (iv) – (d)

24. Which of the following sources of receipts in the government budget increases its liabilities?

1. Direct taxes
2. Recovery of loans
3. Borrowings
4. Dividend from public sector undertakings

25. Primary deficit in a government budget is

1. Revenue expenditure – Revenue receipts
2. Total expenditure – Total receipts
3. Revenue deficit – Interest payments 
4. Fiscal deficit – Interest payments.

Answer:

1. Answer  (A) Budget

2. Answer  (D) Wealth tax

3. Answer  (A) 1 April to 31 March

4. Answer  (B) Budget deficit

5. Answer  (D) Borrowings

6. Answer  (C) Both of these

7. Answer  (C) When a government spends more than it can collect as revenue, it incurs a budget deficit

8. Answer  (C) It is the difference between the total expenditure and receipts of a government excluding borrowings

9. Answer  (D) The primary deficit is zero when the fiscal deficit is equal to the interest payment

10. Answer  (A) The direct taxes are collected from the income earners

11. Answer  (B) April 1st to March 30th

12. Answer  (B) The capital budget consists of capital expenditure and capital receipts

13. Answer  d) Disinvestment

Explanation: capital receipts are those receipts which either reduces assets or increase liabilities. Disinvestment reduces assets

14. Answer  c) External grants

Explanation: Revenue receipts are the receipts which does not affects assets and liabilities. External grants does not change present status of assets and liabilities.

15. Answer  d) Borrowings requirements

Explanation:  Fiscal deficit shows the total borrowings requirement of a government in a fiscal (financial) year.

16. Answer  c) (a) less (b)

Explanation:  The primary deficit represents the loan requirement of the government to meet only current year excess expenditure excluding the interest payment on accumulated loan.

17. Answer  d) All the above

Explanation: Objective of the government budget is 1) Optimum allocation of resources, 2) Reduce inequilities of the income and 3) economic stability (Price stability)

18. Answer  d) fiscal deficit is equal to interest payment

Explanation: Primary deficit is the difference between the fiscal deficit and interest on accumulated loans. If fiscal deficit is equal to the interest payment, The primary deficit is zero

19. Answer  (4) Fiscal deficit is equal to interest payment

Explanation: Primary deficit indicates borrowing requirements of the government to meet fiscal deficit net of interest payments.

20. Answer  (1) Loans advanced by World Bank

Explanation: Loan advanced by World Bank is a capital receipt as it raises liability or reduces assets.

21. Answer  (2) Other than interest payments. 

Explanation: Primary deficit indicates borrowing requirements of the govt. to m t fiscal deficit net of interest payments.

22. Answer  (2) Primary deficit plus interest payments.

Explanation: Fiscal Deficit refers to the excess of total expenditure over total receipts excluding borrowings.

23. Answer  (2) (ii) – (b)

Explanation: Primary deficit indicates borrowing requirements of the govt. to meet  fiscal deficit net of interest payments.

24. Answer  (3) Borrowings

Explanation:  Borrowings is a capital receipt as it creates a liability.

25. Answer  (4) Fiscal deficit – Interest payments.