Class 12 Economics Chapter 5 – Government Budget and the Economy Important Questions
These Government Budget and the Economy Important Questions cover the most important MCQs, one-word questions, assertion and reason questions and descriptive questions from NCERT Class 12 Economics Chapter 5. The questions are prepared from NCERT concepts and important exam-oriented topics for quick revision and practice.
This page is useful for UPSC, SSC, PSC, Railway, Banking, CUET, CBSE and Class 12 Economics preparation, helping students revise important concepts related to government budget, fiscal policy, taxation, public expenditure, budget deficits and government receipts.
Table of Contents
Multiple Choice Questions (MCQs)
These MCQs from Government Budget and the Economy are designed for quick objective revision and competitive exam preparation. The questions cover important fiscal concepts, budget components, taxation systems, public expenditure and deficit measures discussed in the NCERT chapter.
MCQ 1
A government budget is a statement of:
- A. Household expenditure
- B. Government’s expected receipts and expenditures
- C. Company profits
- D. Banking transactions
Answer: B. Government’s expected receipts and expenditures
Page Reference: Page 74
MCQ 2
Which of the following is a revenue receipt?
- A. Borrowings
- B. Recovery of loans
- C. Tax revenue
- D. Sale of assets
Answer: C. Tax revenue
Page Reference: Page 75
MCQ 3
Revenue expenditure mainly includes:
- A. Construction of roads
- B. Purchase of machinery
- C. Salaries and pensions
- D. Purchase of land
Answer: C. Salaries and pensions
Page Reference: Page 76
MCQ 4
Capital expenditure creates:
- A. Revenue deficit only
- B. Assets for the economy
- C. Tax burden only
- D. Imports only
Answer: B. Assets for the economy
Page Reference: Page 76
MCQ 5
Which tax is directly paid by the person on whom it is imposed?
- A. GST
- B. Excise duty
- C. Direct tax
- D. Customs duty
Answer: C. Direct tax
Page Reference: Page 77
MCQ 6
GST is mainly classified as:
- A. Direct tax
- B. Indirect tax
- C. Wealth tax
- D. Corporate tax
Answer: B. Indirect tax
Page Reference: Page 77
MCQ 7
Fiscal deficit occurs when:
- A. Revenue receipts exceed expenditure
- B. Total expenditure exceeds total receipts excluding borrowings
- C. Borrowings are zero
- D. Revenue expenditure is zero
Answer: B. Total expenditure exceeds total receipts excluding borrowings
Page Reference: Page 79
MCQ 8
Revenue deficit refers to:
- A. Excess of capital expenditure over capital receipts
- B. Excess of revenue expenditure over revenue receipts
- C. Excess of borrowings over taxes
- D. Excess of exports over imports
Answer: B. Excess of revenue expenditure over revenue receipts
Page Reference: Page 78
MCQ 9
Primary deficit is equal to:
- A. Fiscal deficit minus interest payments
- B. Revenue deficit minus borrowings
- C. Fiscal deficit plus revenue deficit
- D. Revenue expenditure minus taxes
Answer: A. Fiscal deficit minus interest payments
Page Reference: Page 79
MCQ 10
Which policy uses taxation and government expenditure to influence the economy?
- A. Monetary policy
- B. Fiscal policy
- C. Trade policy
- D. Exchange rate policy
Answer: B. Fiscal policy
Page Reference: Page 80
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One-Word / Very Short Answer Questions
These one-word and factual questions help students quickly revise important fiscal concepts, budget components and deficit measures from the chapter. The section is especially useful for UPSC, SSC, PSC, CUET and other objective examinations.
-
What is a government budget?
Answer: Statement of government receipts and expenditures -
Which receipts do not create liabilities?
Answer: Revenue receipts -
Which expenditure creates assets?
Answer: Capital expenditure -
Which tax is paid directly by taxpayers?
Answer: Direct tax -
Which tax is included in indirect taxes?
Answer: GST -
What is excess of revenue expenditure over revenue receipts called?
Answer: Revenue deficit -
What is excess of total expenditure over total receipts excluding borrowings called?
Answer: Fiscal deficit -
Fiscal deficit minus interest payments equals what?
Answer: Primary deficit -
Which policy uses taxation and expenditure measures?
Answer: Fiscal policy -
What is sale of government shares called?
Answer: Disinvestment
Assertion and Reason Questions
These assertion and reason questions from Government Budget and the Economy help students develop conceptual clarity and analytical understanding of fiscal policy, taxation and budget deficits. They are highly useful for board exams and competitive examinations.
Question 1
Assertion (A): A government budget shows expected receipts and expenditures.
Reason (R): Budget helps government plan economic activities and welfare measures.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Question 2
Assertion (A): Revenue receipts do not create liabilities for the government.
Reason (R): Revenue receipts mainly include taxes and non-tax revenue.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Question 3
Assertion (A): Capital expenditure creates assets for the economy.
Reason (R): Capital expenditure includes infrastructure development and investment.
Options:
- A. Both A and R are true and R is the correct explanation
- B. Both A and R are true but R is not the correct explanation
- C. A is true but R is false
- D. A is false but R is true
Correct Option: A
Important Exam-Based Concept Questions
These important descriptive and analytical questions from Government Budget and the Economy are useful for board examinations and competitive exams. The questions focus on conceptual understanding, fiscal policy, taxation systems and NCERT-based economic analysis.
- Define government budget and explain its objectives.
- Differentiate between revenue receipts and capital receipts.
- Explain the difference between revenue expenditure and capital expenditure.
- Discuss the importance of fiscal policy in economic development.
- Explain the meaning and significance of fiscal deficit.
- Differentiate between revenue deficit and fiscal deficit.
- Explain the concept of primary deficit.
- Discuss the role of taxation in government budgeting.
- Differentiate between direct taxes and indirect taxes.
- Explain the role of public expenditure in economic growth.
- Discuss the importance of subsidies in the economy.
- Explain the concept and importance of disinvestment.
- Analyse the impact of budget deficits on the economy.
- Discuss the role of government budget in reducing inequalities.
- Explain how fiscal policy helps in maintaining economic stability.
Quick Revision Points
- Government budget is a statement of expected receipts and expenditures.
- Revenue receipts do not create liabilities.
- Capital expenditure creates assets for the economy.
- Revenue expenditure includes:
- Salaries
- Pensions
- Subsidies
- Direct taxes are paid directly by taxpayers.
- GST and customs duty are indirect taxes.
- Revenue deficit = Revenue expenditure − Revenue receipts
- Fiscal deficit = Total expenditure − Total receipts excluding borrowings
- Primary deficit = Fiscal deficit − Interest payments
- Fiscal policy uses taxation and public expenditure to influence the economy.
- Disinvestment means sale of government assets or shares.
- Public expenditure promotes economic development and welfare.