| Board | CBSE |
| Textbook | NCERT |
| Class | Class 12 |
| Subject | Economics |
| Chapter | CUET Economics Chapter-Government Budget and the Economy |
| Chapter Name | Government Budget and the Economy |
| Category | CUET (Common University Entrance Test) UG |
Important MCQ Questions on CUET Economics Chapter-Government Budget and the Economy with Detailed explanation
HT having an expert teacher of Economics prepared Important MCQ Questions on CUET Economics Chapter-Government Budget and the Economy with Detailed explanations. All the Chapters in the syllabus of CUET Economics are covered with coverage of the entire syllabus. This page is prepared for Chapter-Government Budget and the Economy and covers all important topics of the competitive exam CUET for domain subject test. Check out the chapter-wise CUET Economics MCQ questions.
MCQ Questions for CUET Economics Chapter-Government Budget and the Economy Set-1
Macroeconomic Economics - MCQ on Government Budget And The Economy
Class XII
Q.1. Government budget is a statement of estimates of the government receipts and government expenditure during the period of
a) financial week.
b) financial month.
c) financial day.
d) financial year.
Answer:
d
Explanation: Government budget prepared for the period of one financial year from April 1 to March 31.
Q.2. Two main components of the government budget are
a) revenue budget and expenditure budget.
b) revenue budget and capital budget.
c) capital receipts and tax receipts.
d) revenue receipts and tax receipts.
Answer:
b
Explanation: Government budget divided into two types of budget on the basis of expenditure and receipts, which are (i) Revenue budget and (ii) Capital budget.
Q.3. Budget receipts can be classified into
) capital receipts and expenditure receipts.
b) capital receipts and tax receipts.
c) capital receipts and revenue receipts.
d) capital receipts and capital expenditure.
Answer:
c
Explanation: Government gets all of her revenue from two types of receipts, which are revenue receipts and capital receipts.
Q.4 Revenue receipts refer to those receipts which consist of
a) tax revenue.
b) tax and non-tax revenue.
c) non-tax revenue.
d) direct tax revenue and indirect tax revenue.
Answer:
b
Explanation: Revenue receipts of government budget classified in only two parts, tax receipts and non-tax receipts. All of the money in revenue receipts comes from these two sources.
Q.5. Non-tax receipts consist of all revenue receipts other than
) fees.
b) indirect taxes.
c) escheats.
d) fine and penalties.
Answer:
b
Explanation: Non- tax receipts are those receipts, which are not collected from people or firms as a tax.
Q.6 Interest receipts and dividends on investments made by the government are part of
) expenditure receipts.
b) capital receipts.
c) tax receipts.
d) non-tax receipts.
Answer:
d
Explanation: Interest receipts and dividends on investment made by the government are not imposed on the peoples as tax. So these receipts are parts of non-tax receipts.
Q.7. When the liability to pay a tax and the burden of tax fall on the same person, then that tax is
a) direct tax.
b) indirect tax.
c) sales tax.
d) service tax.
Answer:
a
Explanation: Direct tax is that tax which directly paid by that person on whom it legally imposed.
Q.8. Service tax is an example of
a) direct tax.
b) custom duty.
c) indirect tax.
d) income tax.
Answer:
c
Explanation: Service tax is imposed on one person and paid by some another person. So it is an indirect tax.
Q.9. Tax on import and export is known as
a) income tax.
b) trade tax.
c) sales tax.
d) custom duty.
Answer:
d
Explanation: Government imposed a tax on those goods which import or export from country. Name of this tax is custom duty.
Q.10. Administration revenue is that revenue which includes
) license fees, fines, and income tax.
b) fees, license fees, fines, escheats.
c) fines, escheats, sales tax, and income tax.
d) fees, escheats, custom duty, and license fees.
Answer:
b
Explanation: Administration revenues are levied from peoples by government administrative departments as various types of fees and fines. Administration revenue is a part of non-tax receipts.
MCQ Questions for CUET Economics Chapter-Government Budget and the Economy Set-2
Q.11. When the liability to pay a tax is on one person and the burden of tax transfers to another person then that tax is
a) indirect tax.
b) income tax.
c) direct tax.
d) sales tax.
Answer:
a
Explanation: Indirect tax is the tax in which final burden of tax is transferred to that person who is final buyer of good and services. It means this falls on consumer.
Q.12. Sales tax comes in the category of
a) income tax.
b) indirect tax.
c) custom duty.
d) direct tax.
Answer:
b
Explanation: Sales tax is an indirect tax because it imposed on producer and producer include the tax amount in price of good’s price. Finally this tax paid by the consumer of that good.
Q.13. Commercial revenue is part of
) tax revenue.
b) administrative revenue.
c) non-tax revenue.
d) capital revenue.
Answer:
c
Explanation: Commercial revenue is the revenue which includes payment for postages, tolls, interest and fund borrowed, electricity and railway services. commercial revenue is the major source of non-tax revenue of the government.
Q.14. Borrowings by the government are
) capital receipts.
b) Revenu receipts.
c) tax receipts.
d) non-tax receipts.
Answer:
a
Explanation: borrowings by the government are capital receipts because they create liability or reduce assets.
Q.15. Payment of salaries to government employees is
a) capital expenditure.
b) tax expenditure.
c) salary expenditure.
d) revenue expenditure.
Answer:
d
Explanation: Payment of salary is revenue expenditure because revenue expenditure is the expenditure on items, which do not lead to creation of assets.
Q.16. Expenditure for the construction of school buildings is the
a) non-development expenditure.
b) capital expenditure.
c) revenue expenditure.
d) tax expenditure.
Answer:
b
Explanation: Construction of school building is capital expenditure because capital expenditure is the expenditure on creation of assets.
Q.17. Expenditure on Police, Judiciary and defence are part of
a) non-plan expenditure.
b) development expenditure.
c) capital expenditure.
d) defence expenditure.
Answer:
a
Explanation: Expenditure on police, judiciary and defence are non-plan expenditure because non-plan expenditure refers to expenditure, which is incurred by on routine functions of government.
Q.18. Government expenditure on agriculture, industry and transport is
a) capital expenditure.
b) revenue expenditure.
c) development expenditure.
d) non-development expenditure.
Answer:
c
Explanation: Expenditure on agriculture, industry and transport is development expenditure because development expenditure is that expenditure which is incurred on provision of developmental economic services and social services.
Q.19. VAT refers to
a) value-added tax.
b) value after tax.
c) value and time.
d) very advanced tax.
Answer:
a
Explanation: VAT is an value added tax which is imposed on value added at various stages of production and each stage of production.
Q.20. When estimated revenue equals the estimated expenditure that is
a) surplus budget.
b) deficit budget.
c) fiscal budget.
d) balanced budget.
Answer:
d
Explanation: A balance budget is that budget in which all estimated government expenditures is equal to all estimated revenue of government.
Q.21. VAT is an
) excise duty.
b) indirect tax.
c) direct tax.
d) gift tax.
Answer:
b
Explanation: VAT is an indirect tax because it imposed on value added at various stages of production, and final burden falls on the consumer.
Q.22. Surplus budget is a situation where
a) estimated revenue is more than capital expenditure.
b) estimated expenditure is more than estimated revenue.
c) estimated expenditure is less than estimated revenue.
d) estimated expenditure is equal to estimated revenue.
Answer:
c
Explanation: when estimated revenue of government budget is more than estimated expenditures of government budget, then the budget is surplus budget.
Q.23. When the economy is in the grip of recession then government will make
a) deficit budget.
b) surplus budget.
c) economy budget.
d) balanced budget.
Answer:
a
Explanation: Deficit budget increase the aggregate demand in the market because government increase public expenditure in deficit budget.
Q.24. Gift tax is a
) indirect tax.
b) value-added tax.
c) wealth tax.
d) direct tax.
Answer:
d
Explanation: Gift tax is a direct tax because final burden of tax falls on that person on whom it is legally imposed and it can’t be shifted to another person.
Q.25. When there is an inflation situation in the economy ththe en best budget type to reduce inflation is
a) inflation budget.
b) surplus budget.
c) deficit budget.
d) balanced budget.
Answer:
b
Explanation: Surplus budget reduce the aggregate demand from economy because government reduce public expenditure in surplus budget.
Q.26. Wealth tax is a
) direct tax.
b) indirect tax.
c) sales tax.
d) value-added tax.
Answer:
a
Explanation: Wealth tax is a direct tax because final burden of tax falls on that person on whom it is legally imposed and it can’t be shifted to another person.
Q.27. When the economy performing well and the situations of inflation and deflation are not present in the economy the hen government will make
a) deficit budget.
b) balanced budget.
c) surplus budget.
d) economy budget.
Answer:
b
Explanation: Balanced budget will not increase or decrease the aggeregate demand in economy because government will not increase or decrease public expenditure. Government will spend equal to its revenue earnings.
Q.28. Primary deficit indicates
a) borrowing requirement of the government.
b) laon amount of government.
c) total expenditure of the government.
d) interest payment of government.
Answer:
a
Explanation: Primary deficit is the net deficit of government for one financial year period . Primary deficit is the amount, which will be arranged by government to cover deficit.
Q.29. Recovery of loans came under the category of
) revenue receipts.
b) tax receipts.
c) capital receipts.
d) non-tax receipts.
Answer:
c
Explanation: Capital receipts are those receipts which create liability or cause reduction in assets, and recovery of loan cause reduction is assets.
Q.30. Purchase of new machinery by the government for an oil refinery is a
) revenue expenditure.
b) capital expenditure.
c) tax expenditure.
d) machinery expenditure.
Answer:
b
Explanation: Capital expenditure is the expenditure on creation of assets, and by purchase of machinery government creating assets.
Q.31. Borrowings by the government are
a) revenue receipts.
b) tax receipts.
c) revenue expenditure.
d) capital receipts.
Answer:
d
Explanation: Capital receipts create liability and reduce assets. borrowings are creating liability for government.
Q.32. Interest and dividends on investments made by the government are calculated in
) capital receipts.
b) tax receipts.
c) revenue receipts.
d) investment receipts.
Answer:
c
Explanation: Interest and dividend on investment of government are revenue receipts because revenue receipts are those receipts of government, which do not create any liability or reduction in assets.
Q.33. Small savings and deposits in PPF in general are
) capital receipts.
b) revenue receipts.
c) tax receipts.
d) non-tax receipts.
Answer:
a
Explanation: Small savings and deposits in PPF are liability on government, and capital receipts cause reduction in assets and create liability.
Q.34. Loan and grants given state and union territories are
a) revenue expenditure.
b) development expenditure.
c) non-development expenditure.
d) loan expenditure.
Answer:
b
Explanation: Development expenditure increases the economic growth of country. It includes the expenditure on productive and welfare activities. Loans given to states and union territories are also for public welfare purpose.
Q.35. Money spend on the minting of coins and printing of currency notes is a
) monetary expenditure.
b) development expenditure.
c) non-development expenditure.
d) capital expenditure.
Answer:
c
Explanation: Non-development expenditure is not concerned with the economic development activity, and money spend on minting coins and printing of currency note is not for development purpose.
Q.36. Economic stability in the country increase the
a) rate of deflation.
b) rate of inflation.
c) rate of interest.
d) rate of growth.
Answer:
d
Explanation: Economic stability means government revenue receipts and government expenditure is in balance and no existence of inflation or deflation in market.
Q.37. Corporation tax is
a) indirect tax.
b) direct tax.
c) value-added tax.
d) production tax.
Answer:
b
Explanation: Corporation tax is a direct tax because final burden of tax falls on that person on whom it is legally imposed and it can’t be shifted to another person.
Q.38. Loans to foreign governments are a
) capital expenditure.
b) revenue expenditure.
c) non-development expenditure.
d) plan expenditure.
Answer:
a
Explanation: Capital expenditure leads to creation of assets, and by giving loans to foreign government, government creating assets.
Q.39. Money comes from the disinvestment of public sector enterprises accounted in
a) Revenue receipts.
b) non-tax receipts.
c) capital receipts.
d) tax receipts.
Answer:
c
Explanation: Capital receipts are those receipts which create liability or cause reduction in assets, and disinvestment of public sector enterprises cause reduction is assets.
Q.40. Progressive tax is a tax in which the rate of taxation
a) increases with a decrease in income.
b) increase with the increase in income.
c) decrease with an increase in income.
d) stay constant with an increase in income.
Answer:
b
Explanation: Progressive taxation is that system of taxation in which rate of tax increase with increase in income and decrease with decrease in income. In progressive taxation burden of tax falls more on rich people and less on poor people.
Q.41. Rate of tax increase with a decrease in income and decrease with an increase in income in
a) specific tax.
b) value-added tax.
c) progressive tax.
d) regressive tax.
Answer:
d
Explanation: Regressive taxation is that system of taxation in which greater burden of tax falls on poor people and less burden on rich people.
Q.42. When tax is levied on a commodity based on its units, size and weight, it is
a) progressive tax.
b) regressive tax.
c) specific tax.
d) value-added tax.
Answer:
c
Explanation: Specific tax levied according to units, size and weight of the commodity.
Q.43. Income of state, which arises out of the property, that comes to it for want of legal heir is
a) escheat.
b) gift and grant.
c) fees.
d) special assessment.
Answer:
a
Explanation: Escheat Refers to that income of state, which arises out of property, that comes to it for want of legal heir
. Such property has no claimant and state alone has the legal right over it.
Q.44. Payment, which is made by owners of those properties whose value, has been appreciated due to developmental work of government is
a) escheat.
b) special assessment.
c) fees.
d) income from public enterprises.
Answer:
b
Explanation: When value of neighbouring property or its rental value appreciates due to developmental activity of government then a part of the developmental expenditure is recovered from the owner of such property by special assessment.
Q.45. Policy under which government uses the instruments of taxation, public spending and public borrowings to achieve various objectives is
a) economic policy.
b) budget policy.
c) trade policy.
d) fiscal policy.
Answer:
d
Explanation: Fiscal policy is that policy of government, which used for taxation, public expenditure and government borrowing to maintain the growth rate of developmental programs and to achieve various economic goals of country.
Q.46. Payments, made by lawbreakers to the government by way of economic punishment, are
) fees.
b) escheat.
c) fines and penalties.
d) special assessment.
Answer:
c
Explanation: Fines and penalties are those payments, which are made by lawbreakers to government as economic punishment. Its actual aim is to force people to be law abiding. fines and penalties determined by the government in arbitrary manner not on the basis of administrative cost.
Q.47. When the government charged some amount of money to permit to do some specific work, is
a) fees.
b) license fees.
c) fines and penalties.
d) special assessment.
Answer:
b
Explanation: License fees are charged to give permission for something by the government. No service is provided to license holder by government.
Q.48. Compulsory payment made by an individual, household or firm to the government without reference to anything in return is a
) fees.
b) license fees.
c) fine and penalty.
d) tax.
Answer:
d
Explanation: Tax is a compulsory payment to the government by the households, firms or other institutional units. Taxpayer cannot expect any service or benefit from the government in return. If a person fails to pay tax, he is liable to penal action.
Q.49. Ad Valorem tax is
a) gift tax.
b) wealth tax.
c) value-added tax.
d) excise duty.
Answer:
c
Explanation: Ad Valorem is the other name of Value added tax (VAT). It is an indirect tax, which is imposed on various stages of of production. Value added refers to the difference between value of output and value of intermediate consumption.
Q.50. Payment to the government for services that it renders to the people is
a) Fees.
b) Fine and penalty.
c) tax.
d) special assessment.
Answer:
a
Explanation: Fee is not a payment for commercial service. It is a payment for administrative and judicial services provided to the people. Generally, amount of fee is equivalent to the cost of service provided.