Ch 5 Government Budget and The Economy

1. What are the two major differences between private goods and public goods? Provide examples. Page 67
2. Explain the allocation function of the government budget. Why must the government provide public goods? Page 67
3. What is the redistribution function of the government budget? How does the government achieve it? Page 67-68
4. Describe the stabilisation function of the government budget. When does the government need to expand or reduce aggregate demand? Page 68
5. Distinguish between revenue receipts and capital receipts with examples. Page 68-69
6. What are direct taxes and indirect taxes? Give examples of each from the Indian context. Page 68
7. Distinguish between revenue expenditure and capital expenditure. Page 69-70
8. What is revenue deficit? What are its implications for the economy? Page 71-72
9. Define fiscal deficit. How does it differ from revenue deficit? Page 72
10. What is primary deficit? Why is it calculated? Page 72
11. What is the balanced budget multiplier? Prove that it is equal to 1. Page 75-76
12. How do proportional income taxes act as an automatic stabiliser? Explain with reasoning. Page 77-78
13. What is Ricardian Equivalence? Explain its argument regarding government debt. Page 79
14. Explain the main features of the Fiscal Responsibility and Budget Management Act (FRBMA), 2003. Page 81-82
15. What is GST? How is it different from the pre-GST indirect tax regime? Page 82

What is the constitutional requirement in India for presenting the budget?

Which of the following is an example of a public good?

Public goods are non-excludable. This means:

Free-riders are people who:

Which of the following is a non-tax revenue receipt of the government?

Capital receipts of the government are those that:

Disinvestment by the government refers to:

Which of the following is the single largest component of non-plan revenue expenditure?

Revenue deficit = ?

Fiscal deficit indicates:

Primary deficit is equal to:

If marginal propensity to consume (MPC) is 0.8, the government expenditure multiplier is:

If MPC is 0.8, the tax multiplier is:

The balanced budget multiplier is always equal to:

Proportional income tax acts as an automatic stabiliser because:

Ricardian Equivalence argues that:

According to FRBMA, fiscal deficit must be reduced to not more than what percent of GDP?

GST is a:

Which of the following is true about GST?

What is the financial year period for the Indian government budget? Page 66

Goods that are non-rivalrous and non-excludable are called? Page 67

The person who enjoys benefits of a public good without paying is called a? Page 67

Taxes like personal income tax and corporation tax are classified as? Page 68

Duties levied on goods produced within the country are called? Page 68

Sale of shares of Public Sector Undertakings by the government is known as? Page 69

Expenditure that does not create physical or financial assets is called? Page 69

The excess of revenue expenditure over revenue receipts is called? Page 71

The difference between total expenditure and the sum of revenue receipts and non-debt creating capital receipts is called? Page 72

Fiscal deficit minus net interest liabilities gives? Page 72

The multiplier that measures the effect of a simultaneous equal increase in government spending and taxes on income is called? Page 75-76

The tax system that acts as a shock absorber against GDP fluctuations is called? Page 77

The deliberate change in government spending and taxes to stabilise the economy is called? Page 77

The theory that taxation and borrowing are equivalent means of financing expenditure is known as? Page 79

The Act enacted in 2003 to ensure fiscal prudence in India is? Page 81

The single comprehensive indirect tax introduced in India from 1 July 2017 is? Page 82