Chapter – 4

Govt. Budget and The Economy

In this post, we have given the Important Questions of Class 12 Economics Chapter 4 (Govt. Budget and The Economy) in English. These Important Questions are useful for the students who are going to appear in class 12 board exams.

Board	CBSE Board, UP Board, JAC Board, Bihar Board, HBSE Board, UBSE Board, PSEB Board, RBSE Board
Textbook	NCERT
Class	Class 12
Subject	Economics
Chapter no.	Chapter 4
Chapter Name	(Govt. Budget and The Economy)
Category	Class 12 Economics Important Questions in English
Medium	English

Chapter 4 Govt. Budget and The Economy

INFORMATION AND CONCEPT BASED QUESTIONS

Q1 What is meant by the fiscal year in India?

Ans- Fiscal year is the year which begins on April 1 and ends on March 31 of the following year.

Q2.State any one objective of government budget.

Ans- Through revenue and expenditure policy, the government strives to achieve high rate of growth.

Q3 Define revenue budget.

Ans- revenue budget a the statement of estimated revenue receipts and estimated revenue expenditureduring a fiscal year

Q4 Define revenue receipts.

Ans- revenue receipts are those receipts which neither create any lability nor lead to any reduction in assets.

Q5 Define revenue expenditure.

Ans- revenue expenditure is that expenditure of the government which neither creates assets for the government nor causes a reduction in liabilities of the government.

Q6 What is a direct tax?

Ans- Adirect tax is that tax the final burden of which falls on that very person whois liable to pay it to the government.

Q7 What is an indirect tax?

Ans- Indirect tax is a tax on goods and services. Those who are liable to pay this tax need not bear the finalburden of this tax.

Q8 What is a progressive tax?

Ans- Progressive tax is a tax that causes relatively less real burden on the poor and more on the rich

Q9 Define regressive tax.

Ans- Regressive tax is a tax that causes relatively more real burden on the poor and less on the rich.

Q10 What is value added tax?

Ans. Value added tax is an indirect tax which is imposed on ‘value added’ at the various stages of production.

Q11 Define capital budget.

Ans. Capital budget is the statement of estimated capital receipts and estimated capital expenditure during a fiscal year

Q12 Define capital receipts.

Ans- Capital receipts are those receipts which either create a liability or lead to reduction in assets.

Q13 Define capital expenditure.

Ans- Capital expenditure is an expenditure which leads to creation of assets or reduction in liabilities

Q14 Give two examples of capital receipts.

Ans. (i) Recovery of loans, and (i) Borrowings.

Q15 Give two examples of capital expenditure.

Ans-(i)Expenditure on the purchase of land by the government. (ii)Loans granted by the central government to state governments

Q16 Define plan expenditure.

Ans- Plan expenditure is the expenditure whichis related to some specified plan for the year.

Q17 Define non plan expenditure

Ans. Non-plan expenditure is the expenditure which is not related to any specified plan for the year.

Q18 Why is payment of interest a revenue expenditure?

Ans. Payment of interest is treated as a revenue expenditure, because it neither reduces liability of the payer nor adds to his assets.

Q19 Why is recovery of loans treated as a capital receipt?

Ans. Recovery of loans is a capital receipt because it leads to reduction in assets.

Q20 How is disinvestment by the government a capital receipt?

Ans. Disinvestment by the government is a capital receipt, as it leads to a reduction in assets.

Q21 What is budgetary deficit?

Ans. Budgetary deficit is the excess of total expenditure over total receipts of the government.

Q22 Define surplus budget.

Ans. Surplus budget is that budget in which government receipts are more than government expenditure.

Q23 Define balanced budget.

Ans. Balanced budget is that budget in which government receipts are equal to government expenditure.

Q24 What is meant by revenue deficit?

Ans: Revenue deficit is equal to the excess of total revenue expenditure over the total revenue receipts

Revenue deficit = Revenue expenditure – Revenue receipts

Q25 Define fiscal deficit.

Ans. Fiscal deficit is equal to the excess of total expenditure over the sum of revenue receipts and capital receipts excluding borrowing

Fiscal deficit= (Revenue expenditure + Capital expenditure) –(Revenuereceipts + Capital receipts other than borrowing)

Q26 Define primary deficit.

Ans. Primary deficit is the difference between fiscal deficit and interest payment.

Primary deficit= Fiscal deficit – Interest payment

Q27 What is the significance of primary deficit?

Ans. The significance of primary deficit is that it reflects borrowings on account of current year expenditure exceeding the current year receipts of the government. interest payment on the accumulated borrowing Is not accounted for.

Q28 What is the significance of measuring fiscal deficit?

Ans. The significance of measuring fiscal deficit is that it reflects total borrowings of the government during the financial year. Accumulated borrowings over the year reflect accumulated burden of national debt which is to be borne by the future generations.

Q29 Why are subsidies treated as revenue expenditure?

Ans. Subsidies are treated as revenue expenditure by the government, because this expenditure

• does not reduce liability of the government, nor
• adds to assets of the government.

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