Government Budget and the Economy MCQ — Class 12

Government budget

Government budget: an annual statement of estimated government receipts and expenditure for the financial year

Allocation objective

Allocation objective: budget policy can influence allocation of resources toward socially desirable goods, public services or priority sectors

Redistribution objective

Redistribution objective: tax and expenditure policies can be used to reduce undesirable inequalities in income and wealth

Stabilisation objective

Stabilisation objective: budget policy can help manage fluctuations in aggregate demand, employment and price stability

Revenue receipts

Revenue receipts: government receipts that neither create a liability nor reduce government assets

Capital receipts

Capital receipts: government receipts that either create a liability or reduce assets

Revenue expenditure

Revenue expenditure: government expenditure that generally does not create assets or directly reduce liabilities and mainly supports routine functioning and services

Capital expenditure

Capital expenditure: government expenditure that creates assets or reduces liabilities

Revenue deficit

Revenue deficit: revenue expenditure minus revenue receipts

Fiscal and primary deficit

Fiscal and primary deficit: fiscal deficit is total expenditure minus total receipts excluding borrowings, while primary deficit equals fiscal deficit minus interest payments

1. Which concept best matches this situation? The government presents expected revenue, borrowing and spending for the coming year.

1. Allocation objective
2. Government budget
3. Stabilisation objective
4. Revenue expenditure

2. Which concept best matches this situation? Public spending is directed toward education or infrastructure.

1. Redistribution objective
2. Revenue receipts
3. Allocation objective
4. Capital expenditure

3. Which concept best matches this situation? Progressive taxation finances programmes benefiting lower-income groups.

1. Stabilisation objective
2. Capital receipts
3. Revenue deficit
4. Redistribution objective