Online Test — Government Budget and the Economy
15 Questions • 15 min • Chapter MCQ
15:00
Question 1 of 15
The annual statement of the government's estimated receipts and expenditure is the:
Budget
Tax
Deficit
Surplus
Explanation: That is the government budget.
Question 2 of 15
Providing public goods like defence is the budget's ____ function.
Allocation
Distribution
Stabilisation
Production
Explanation: Supplying public goods is the allocation function.
Question 3 of 15
Reducing inequality is the budget's ____ function.
Allocation
Distribution
Stabilisation
Trade
Explanation: Reducing inequality is the distribution function.
Question 4 of 15
Smoothing the booms and slumps of the economy is the ____ function.
Allocation
Distribution
Stabilisation
Tax
Explanation: Stabilising output and prices is the stabilisation function.
Question 5 of 15
A revenue receipt:
Neither creates a liability nor reduces an asset
Always creates a liability
Reduces an asset
Is borrowing
Explanation: Revenue receipts change neither assets nor liabilities (e.g. taxes).
Question 6 of 15
Borrowing by the government is a:
Revenue receipt
Capital receipt
Revenue expenditure
Tax
Explanation: Borrowing creates a liability — a capital receipt.
Question 7 of 15
Building a school is an example of:
Revenue expenditure
Capital expenditure
Revenue receipt
A tax
Explanation: Creating an asset is capital expenditure.
Question 8 of 15
Salaries and interest payments are examples of:
Capital expenditure
Revenue expenditure
Capital receipts
Borrowing
Explanation: Day-to-day spending with no asset is revenue expenditure.
Question 9 of 15
Revenue deficit equals revenue expenditure minus:
Revenue receipts
Capital receipts
Interest
Borrowing
Explanation: Revenue deficit = revenue expenditure − revenue receipts.
Question 10 of 15
The fiscal deficit shows the government's:
Total borrowing requirement
Profit
Surplus
Tax revenue
Explanation: Fiscal deficit = total borrowing requirement.
Question 11 of 15
Primary deficit equals fiscal deficit minus:
Interest payments
Taxes
Subsidies
Capital receipts
Explanation: Primary deficit = fiscal deficit − interest payments.
Question 12 of 15
Fiscal policy uses government spending and:
Taxation
Interest rates
Exchange rates
The CRR
Explanation: Fiscal policy uses spending and taxation.
Question 13 of 15
Expansionary fiscal policy is used to fight:
A recession
Inflation
A trade surplus
A budget surplus
Explanation: Expansionary policy (more spending, lower taxes) fights a recession.
Question 14 of 15
To fight inflation, the government should:
Spend more
Reduce spending and raise taxes
Cut all taxes
Borrow more
Explanation: Contractionary fiscal policy lowers AD and inflation.
Question 15 of 15
Fiscal policy and monetary policy are run by the government and the ____ respectively.
RBI
Parliament
Supreme Court
WTO
Explanation: The RBI runs monetary policy; the government runs fiscal policy.