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CodeVID-M12-WS
Government Budget and the Economy — Practice Worksheet
Chapter: Government Budget and the Economy
Topic: Government Budget and the Economy
Maximum Marks: 35
Time: 30 minutes
Name: ____________________ Roll No.: __________ Date: ____________

General Instructions

  • All questions are compulsory.
  • Choose the correct option (A, B, C or D) for each question.
  • The answer key is at the end — try the paper first!
Section A — Multiple Choice (1 mark each) 15 × 1 = 15 marks
1.
The annual statement of the government's estimated receipts and expenditure is the:
  • A.Budget
  • B.Tax
  • C.Deficit
  • D.Surplus
2.
Providing public goods like defence is the budget's ____ function.
  • A.Allocation
  • B.Distribution
  • C.Stabilisation
  • D.Production
3.
Reducing inequality is the budget's ____ function.
  • A.Allocation
  • B.Distribution
  • C.Stabilisation
  • D.Trade
4.
Smoothing the booms and slumps of the economy is the ____ function.
  • A.Allocation
  • B.Distribution
  • C.Stabilisation
  • D.Tax
5.
A revenue receipt:
  • A.Neither creates a liability nor reduces an asset
  • B.Always creates a liability
  • C.Reduces an asset
  • D.Is borrowing
6.
Borrowing by the government is a:
  • A.Revenue receipt
  • B.Capital receipt
  • C.Revenue expenditure
  • D.Tax
7.
Building a school is an example of:
  • A.Revenue expenditure
  • B.Capital expenditure
  • C.Revenue receipt
  • D.A tax
8.
Salaries and interest payments are examples of:
  • A.Capital expenditure
  • B.Revenue expenditure
  • C.Capital receipts
  • D.Borrowing
9.
Revenue deficit equals revenue expenditure minus:
  • A.Revenue receipts
  • B.Capital receipts
  • C.Interest
  • D.Borrowing
10.
The fiscal deficit shows the government's:
  • A.Total borrowing requirement
  • B.Profit
  • C.Surplus
  • D.Tax revenue
11.
Primary deficit equals fiscal deficit minus:
  • A.Interest payments
  • B.Taxes
  • C.Subsidies
  • D.Capital receipts
12.
Fiscal policy uses government spending and:
  • A.Taxation
  • B.Interest rates
  • C.Exchange rates
  • D.The CRR
13.
Expansionary fiscal policy is used to fight:
  • A.A recession
  • B.Inflation
  • C.A trade surplus
  • D.A budget surplus
14.
To fight inflation, the government should:
  • A.Spend more
  • B.Reduce spending and raise taxes
  • C.Cut all taxes
  • D.Borrow more
15.
Fiscal policy and monetary policy are run by the government and the ____ respectively.
  • A.RBI
  • B.Parliament
  • C.Supreme Court
  • D.WTO
Section B — Challenge / Olympiad (2 marks each) 10 × 2 = 20 marks
16.
Total expenditure is ₹40 lakh crore and total receipts excluding borrowing are ₹31 lakh crore. The fiscal deficit is:
  • A.₹9 lakh crore
  • B.₹71 lakh crore
  • C.₹31 lakh crore
  • D.₹40 lakh crore
17.
From the same data, if interest payments are ₹6 lakh crore, the primary deficit is:
  • A.₹3 lakh crore
  • B.₹9 lakh crore
  • C.₹15 lakh crore
  • D.₹6 lakh crore
18.
A revenue deficit is treated as a warning sign because it means the government is borrowing to fund:
  • A.Day-to-day expenses that create no asset
  • B.New highways
  • C.Loan repayment
  • D.Capital projects
19.
During a recession the government raises spending on rural employment and cuts income tax. This is:
  • A.Expansionary fiscal policy
  • B.Contractionary fiscal policy
  • C.Monetary policy
  • D.Trade policy
20.
Because of the multiplier, a ₹100 crore rise in government spending (MPC = 0.75) raises income by:
  • A.₹400 crore
  • B.₹100 crore
  • C.₹75 crore
  • D.₹25 crore
21.
Disinvestment (selling shares of a public-sector company) is classified as a capital receipt because it:
  • A.Reduces the government's assets
  • B.Is a tax
  • C.Creates an asset
  • D.Is recurring income
22.
A persistently high fiscal deficit is a concern mainly because it:
  • A.Adds to public debt and future interest payments
  • B.Lowers all prices
  • C.Removes taxes
  • D.Has no effect
23.
Using progressive income tax and welfare spending together serves the budget's:
  • A.Distribution function
  • B.Allocation function
  • C.Stabilisation function
  • D.Trade function
24.
If the primary deficit falls toward zero while the fiscal deficit stays high, it suggests the deficit is now mostly due to:
  • A.Interest payments on past debt
  • B.New spending
  • C.Tax cuts only
  • D.Capital assets
25.
Fiscal policy and monetary policy are most effective when they:
  • A.Work in the same direction (both ease, or both tighten)
  • B.Always oppose each other
  • C.Are never used
  • D.Ignore aggregate demand

Answer Key

Section A — Multiple Choice (1 mark each)
  1. (A) Budget
  2. (A) Allocation
  3. (B) Distribution
  4. (C) Stabilisation
  5. (A) Neither creates a liability nor reduces an asset
  6. (B) Capital receipt
  7. (B) Capital expenditure
  8. (B) Revenue expenditure
  9. (A) Revenue receipts
  10. (A) Total borrowing requirement
  11. (A) Interest payments
  12. (A) Taxation
  13. (A) A recession
  14. (B) Reduce spending and raise taxes
  15. (A) RBI
Section B — Challenge / Olympiad (2 marks each)
  1. (A) ₹9 lakh crore
  2. (A) ₹3 lakh crore
  3. (A) Day-to-day expenses that create no asset
  4. (A) Expansionary fiscal policy
  5. (A) ₹400 crore
  6. (A) Reduces the government's assets
  7. (A) Adds to public debt and future interest payments
  8. (A) Distribution function
  9. (A) Interest payments on past debt
  10. (A) Work in the same direction (both ease, or both tighten)
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