InterviewSolution
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InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Explain the distinction between fiscal deficit and primary deficit . |
| Answer» Primary deficit is defined as fiscal deficit of current year minus interest payments on previous borrowings. In other words whereas fiscal deficit indicates borrowing requirement inclusive of interest payment, primary deficit indicates borrowing requirement exclusive of interest payment (i.e., amount of loan). | |
| 2. |
What is the basis of classifying government expenditure into Revenue Expenditure and Capital Expenditure ? Which of these types of expenditure is payment of salaries to government employees and why ? |
| Answer» Revenue Expenditure-Expenditure that neither creates an assets nor reduces a liability is called Revenue Expenditure.Capital Expenditure-Expenditure that either creates an asset or reduces a liability is called Capital Expenditure.Expenditure on Payment of Salaries to Government Employees-It is a revenue expenditure as it neither creates any liability nor it reduces the assets | |
| 3. |
Are the following statements true or false ? Give reasons. Government budget is a statement of actual receipts and payments of the government . |
| Answer» False. It is a statement of Estimated (and not actual) receipts and payments of the government . | |
| 4. |
Identify the Objective of Government Budget from the following statements : (i) Government increases taxes on liquor . (ii) Government increases its own expenditure during deflation to increase aggregate demand. (iii) Government increases taxes on super rich people . (iv) Government increases expenditure on infrastructure . |
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Answer» (i) Reallocation of Resources . (ii) Economic Stability . (iii) Reducing inequalities in income and wealth . (iv) Economic Growth. |
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| 5. |
What are the two kind broad divisions of receipts of the government budget ? Name two sources of each kind of receipt. |
| Answer» Capital receipts are those receipts which either create a liability or reduce an asset. Capital Receipts are non-recurring in nature.for example- company sell out its shares to the publicRevenue Receipts are those receipts which neither reduce the assets of the company nor they create any liability. They are always recurring in nature and they are earned during the normal course of business.for example- taxes and non taxes revenue | |
| 6. |
Is the following revenue receipt or capital receipt in the context of government budget and give reason ? (i) Tax receipts (ii) Disinvestment |
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Answer» (i) Tax receipt is a revenue receipt as it neither creates liability nor reduces assets. (ii) Disinvestment (selling shares of Public Sector Undertaking) is a capital receipt because it reduces assets. |
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| 7. |
Components of govt. budgetA. Revenue receiptB. revenue expenditureC. capital receipt and expenditureD. all of these. |
| Answer» Correct Answer - D | |
| 8. |
It affects the assets and liabilities of the government :A. taxesB. fees and finesC. disinvestmentD. forfeiture of bonds. |
| Answer» Correct Answer - C | |
| 9. |
Receipts which do not affect asset or liability status of the governmentA. capital receiptsB. revenue receiptsC. budgetary receiptsD. none of these . |
| Answer» Correct Answer - B | |
| 10. |
The receipts of the government which create liabilities or reduce assets are called_________.A. capital receiptsB. revenue receiptsC. escheatD. fees and fines |
| Answer» Correct Answer - A | |
| 11. |
Which of the following is not an indirect tax ?A. Sales taxB. Corporate taxC. Value added taxD. Excise duty |
| Answer» Correct Answer - B | |
| 12. |
Which of the following is a characteristic feature of tax ?A. Penalty for breaking traffic rulesB. Compulsory or legal paymentC. Payment for special paymentD. Direct payment for purchase of goods |
| Answer» Correct Answer - B | |
| 13. |
Fiscal deficit - interest payment = _________.A. Revenue deficitB. Budget deficitC. Primary deficitD. None of these |
| Answer» Correct Answer - C | |
| 14. |
What do you understand by fiscal deficit ? What problem can fiscal deficit create ? |
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Answer» Fiscal deficit is the excess of total expenditure of the government over total receipts. The implications of fiscal deficit are as follows :- 1. Debt trap. 2. Wasteful expenditure. 3. Inflationary pressure. |
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| 15. |
Borrowing are equivalent to ____________.A. primary deficitB. fiscal deficitC. revenue deficitD. None of these |
| Answer» Correct Answer - B | |
| 16. |
What is meant by domestic (internal) borrowing ? Mention its three sources. |
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Answer» Internal debt or domestic debt is the part of the total government debt in a country that is owed to lenders within the country. he various internal sources from which the government borrows include individuals, banks, business firms, and others. The various instruments of internal debt include market loans, bonds, treasury bills, ways and means advances, etc. |
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| 17. |
Identify the following as revenue expenditure or capital expenditure . Give reasons : (i) Salary paid to government employees . (ii) Purchase of a machine from Korea. (iii) Repayment of loan taken from IMF . (iv) Interest paid on national debt . (v) Interest paid on national debt . (vi) Expenditure on construction of dams. (vi) Social security benefits paid to retired government employees. |
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Answer» (i) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government . (ii) It is a capital expenditure as it increases assets of the government . (iii) It is a capital expenditure as it reduces the liability of the government . (iv) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the govt. (v) It is a capital expenditure as it increases asset of the government . (vi) It is a revenue expenditure as it neither creates any asset nor reduces any liability of the government . |
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| 18. |
What is meant by non-debt capital receipts ? Give its two components. |
| Answer» The Capital receipts are of two types viz. Debt receipt and non-debt receipts. The debt receipts are those which government needs to repay along with interest.Non-debt receipts are those which come to the government by sale of some assets. | |
| 19. |
Define capital receipts. |
| Answer» Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the government. They are non-recurring and non-routine in nature. | |
| 20. |
Give two examples each of Revenue Receipts and Capital Receipts. |
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Answer» Revenue receipts :- Collection of tax revenue, interest on dividend. Capital receipts :- Sale of an asset by the government, disinvestment. |
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| 21. |
Discuss the issue of deficit reduction . |
| Answer» Ways for reducing deficit are-1. reduce wasteful and non- plan expenditures.2. increase in tax rates3. Tax evasion should be controlled. | |
| 22. |
Disinvestment by government means :A. selling of its fixed capital assetsB. sellings of shares of public enterprises held by it .C. sellings of its buildingsD. all the above |
| Answer» Correct Answer - B | |
| 23. |
What is the meaning of non-tax revenue ? Explain the different sources of non-tax revenue . |
| Answer» Non-Tax Revenue is the recurring income earned by the government from sources other than taxesSources of non tax revenue1. fees and fines2. Escheat | |
| 24. |
Distinguish between revenue expenditure and capital expenditure |
| Answer» Revenue expenditure do not create assets for the government and capital expenditure create assets for the government.Revenue expenditure do not cause any reduction in liability and capital expenditure cause reduction in liability of the governmentRevenue expenditure are recurring in nature and capital expenditure are non recurring in nature. | |
| 25. |
What is repayment of loan ? Choose one option.A. capital receiptB. Revenue receiptC. Capital expenditureD. Revenue expenditure |
| Answer» Correct Answer - C | |
| 26. |
Define a tax . |
| Answer» Tax is a compulsory payment imposed on persons and companies to meet the expenditure incurred by the government for common benefit of the people in the country. | |
| 27. |
What is meant by revenue receipts ? |
| Answer» These are those estimated receipts which of the government during the fiscal year which do not affect assets or liabilities status of government. | |
| 28. |
Why is Goods and Services Tax (GST) , an indirect tax ? |
| Answer» The burden of GST can be shifted to other persons (ultimate consumers). | |
| 29. |
What do you mean by revenue deficit ? |
| Answer» Revenue deficit refers to excess of revenue expenditure over revenue receipts during the given fiscal year. | |
| 30. |
Mention two important sources of capital receipts . |
| Answer» 1. Disinvestment2. Recovery of loans | |
| 31. |
Giving reasons, categorise the following into revenue expenditure and capital expenditure (i) Subsidies, (ii) Grants given to state governments, (iii) Repayment of loan and (iv) Construction of school building, (v) Payment of salaries to Government employees. |
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Answer» (i) (ii) (v) are revenue receipts as there is no change in assets or liabilities of the government. (iii) (iv) are capital expenditure as both leads to creation of assets. |
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| 32. |
Explain the basis of classifying government receipts into revenue receipts and capital receipts . Which type of these receipts are borrowings by government and why ? |
| Answer» Revenue Receipts-The receipts which neither create any liability nor lead to any reduction in assets are called Revenue Receipts.Capital Receipts-Capital receipts are receipts that either create liability or reduce assets.Borrowings by Government-It is a capital receipts as it creates liability | |
| 33. |
Are the following statements true or false ? Give reasons. Revenue Receipts from non- tax revenue are always more as compared to tax revenue . |
| Answer» False . Tax revenue has the largest share in revenue receipts of the government . | |
| 34. |
Are the following statements true or false ? Give reasons. Income tax is a direct tax as its impact and incidence is on the same individual. |
| Answer» True. Its burden cannot be shifted on others. | |
| 35. |
How can surplus budget be used during inflation ? |
| Answer» Surplus budget refers to a budget where estimated total receipts are more than estimated total expenditure . In case of surplus budget, government takes more money from the economy than it injects into it. It results a fall in aggregate demand and price level in the economy and helps to combat inflationary situations. | |
| 36. |
Distinguish between direct taxes and indirect taxes and indirect taxes. |
| Answer» Direct taxes are non-transferable taxes paid by the tax payer to the government and indirect taxes are transferable taxes where the liability to pay can be shifted to others. Income Tax is a direct tax while Value Added Tax (VAT) is an indirect tax. | |
| 37. |
What is the time period of a financial year in India ? |
| Answer» Indian Financial Year is from 1st April to succeeding 31st March. | |
| 38. |
Give two examples of tax revenue. |
| Answer» income taxes, payroll taxes, and corporate income taxes.income tax and corporation tax | |
| 39. |
Give two examples of non-tax revenue. |
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Answer» Fees, Penalties and Fines. Investment Income |
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| 40. |
Define revenue expenditure of the government. |
| Answer» Revenue expenditure is expenditure for the normal running of government departments and various services, interest charges on debt incurred by government, subsidies and so on. | |
| 41. |
Define budget (government) receipts. |
| Answer» Receipts Budget shows a detailed summary of the revenue and capital receipts of the government. Description: Receipts Budget forms a part of the Annual Financial Statement. It gives a summary of tax revenue, non-tax revenue and capital receipts. | |
| 42. |
Define budget (government) expenditure. |
| Answer» Expenditure Budget shows the revenue and capital disbursements of various ministries/departments | |
| 43. |
What is meant by primary deficit ? |
| Answer» Primary deficit refers to difference between fiscal deficit of the current year and interest payments on the previous borrowings. Primary Deficit = Fiscal Deficit – Interest Payments. | |
| 44. |
Explain the allocation of resources objective of Government budget. OR Explain the allocation function of government budget . OR Explain how government can influence allocation of resources through government budget . |
| Answer» Through the budgetary policy, Government aims to reallocate resources in accordance with the economic (profit maximisation) and social (public welfare) priorities of the country. Government can influence allocation of resources through:(i) Tax concessions or subsidies:To encourage investment, government can give tax concession, subsidies etc. to the producers. For example, Government discourages the production of harmful consumption goods (like liquor, cigarettes etc.) through heavy taxes and encourages the use of ‘Khaki products’ by providing subsidies.(ii) Directly producing goods and services:If private sector does not take interest, government can directly undertake the production. | |
| 45. |
Name two objectives of government budget. |
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Answer» 1. Reallocation of Resources. 2. Reducing inequalities in income and wealth. |
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| 46. |
Define a government budget. |
| Answer» A government budget is a document prepared by the government or other political entity presenting its anticipated revenues and proposed spending for the coming financial year. | |
| 47. |
Suppose a ban is imposed on consumption of tobacco. Examine its likely effects on (a) GDP (b) Welfare. |
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Answer» (a) GDP would decrease as a lot of tobacco products are consumed in India. (b) Welfare of the people will increase as tobacco is harmful for health. |
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| 48. |
Explain any one objective of Government Budget. |
| Answer» Reduction in income inequality-Economic inequality is an inherent part of every economic system. Government aims to reduce such inequalities of income and wealth, through its budgetary policy. Government aims to influence distribution of income by imposing taxes on the rich and spending more on the welfare of the poor. It will reduce income of the rich and raise standard of living of the poor, thus reducing inequalities in the distribution of income. | |
| 49. |
Reduction in income inequalities raises welfare of the people . How can government help through government budget , in this regard ? Explain. |
| Answer» Economic inequality is an inherent part of every economic system. Government aims to reduce such inequalities of income and wealth, through its budgetary policy. Government aims to influence distribution of income by imposing taxes on the rich and spending more on the welfare of the poor. It will reduce income of the rich and raise standard of living of the poor, thus reducing inequalities in the distribution of income. | |
| 50. |
What one step can be taken through market to reduce the consumption of a product harmful for health . |
| Answer» The consumption of harmful products can be reduced by increasing price in the market which can be done by increasing taxation. | |