Practice test

Budget and taxation - Test Set 2

Review 20 exam-focused questions with detailed explanations, then start the interactive test when you are ready.

20 questions

Questions and explanations

  1. Question 1

    Read the following about the Revenue expenditure.
    A. Revenue Expenditure is expenditure incurred for purpose other than the creation of physical or financial assets of the central government.
    B. It relates to those expenses incurred for the normal functioning of the government departments and various services, interest payments on debt incurred by the government and grants given to state governments and other parties (even though some of the grants may be meant for creation of assets).
    Identify the INCORRECT statement / statements.
    1. Neither A nor B
    2. Only B
    3. Only A
    4. Both A and B
    View explanation

    Sign In to See Explanations. Sign Up Here

  2. Question 2

    Which of the following is NOT a component of revenue receipt?
    1. Grant received by UNESCO
    2. GST
    3. Amount borrowed from World Bank
    4. Fees paid for the registration of property
    View explanation

    Sign In to See Explanations. Sign Up Here

  3. Question 3

    Calculate the revenue receipts from the following information. Revenue deficit = 2.80% of GDP Revenue expenditure = 10.80% of GDP.
    1. 2.70
    2. 8.00
    3. 13.60
    4. 12.80
    View explanation

    Sign In to See Explanations. Sign Up Here

  4. Question 4

    The budget of the central government is known as the ______.
    1. Revised budget
    2. State budget
    3. Annual exposed budget
    4. Union budget
    View explanation

    Sign In to See Explanations. Sign Up Here

  5. Question 5

    Which of the following best represents the Revenue Deficit?
    1. Revenue Expenditure + Revenue Receipts
    2. Primary Deficit – Fiscal Deficit
    3. Revenue Expenditure – Revenue Receipts
    4. Primary Deficit + Fiscal Deficit
    View explanation

    Sign In to See Explanations. Sign Up Here

  6. Question 6

    Why are wealth taxes and gift taxes treated as paper taxes in India?
    1. It is not mandatory for the government to collect these taxes.
    2. They are paid only by government employees, members of the Parliament and Legislative assemblies.
    3. They do not generate much revenue in comparison to others.
    4. Tax payers need to fill out forms only in paper and submit return.
    View explanation

    Sign In to See Explanations. Sign Up Here

  7. Question 7

    The financial year in India starts from 1st April and ends on ______.
    1. 31st July
    2. 30th June
    3. 31st May
    4. 31st March
    View explanation

    Sign In to See Explanations. Sign Up Here

  8. Question 8

    In general, deficit is considered as a ______ concept.
    1. Stock
    2. Flow
    3. Margin
    4. Surplus
    View explanation

    Sign In to See Explanations. Sign Up Here

  9. Question 9

    The Primary Deficit is zero in which of the following situations?
    I. Fiscal Deficit is zero.
    II. Interest payment is equal to Fiscal Deficit.
    1. Neither I nor II
    2. Both I and II
    3. Only I
    4. Only II
    View explanation

    Sign In to See Explanations. Sign Up Here

  10. Question 10

    The stabilisation function of the government budget mainly includes ______.
    1. Allocation of resources
    2. Intervention to expand or reduce the demand
    3. Production of public goods
    4. Distribution of income in society in a fair way
    View explanation

    Sign In to See Explanations. Sign Up Here

  11. Question 11

    Which of the following is a FALSE statement in the context of the government budget?
    1. There is no future obligation to return the amount in case of revenue receipts.
    2. Profit earned through Indian Railways is a part of non-tax revenue.
    3. Fees and fines collected is an example of capital receipt.
    4. Recovery of a loan is a capital receipt.
    View explanation

    Sign In to See Explanations. Sign Up Here

  12. Question 12

    What is the main objective of Fiscal Responsibility and Budget Management Act (FRBMA), 2003?
    1. To reduce fiscal deficit
    2. To reduce subsidies
    3. To increase excise duty
    4. To increase exports
    View explanation

    Sign In to See Explanations. Sign Up Here

  13. Question 13

    A government budget shows a primary deficit of Rs. 6,900 crore. The revenue expenditure on interest payment is Rs. 400 crore. Fiscal deficit is equal to:
    1. Rs. 6,500 crore
    2. Rs. 6,900 crore
    3. Rs. 7,100 crore
    4. Rs. 7,300 crore
    View explanation

    Sign In to See Explanations. Sign Up Here

  14. Question 14

    Recoveries of loans and advances, borrowings, are an example of ______.
    1. Non-tax receipts
    2. Capital receipts
    3. Revenue receipts
    4. Tax receipts
    View explanation

    Sign In to See Explanations. Sign Up Here

  15. Question 15

    What is the basic difference in the aggregates at market price and factor cost?
    1. Depreciation
    2. Indirect taxes
    3. Direct taxes
    4. Net indirect taxes
    View explanation

    Sign In to See Explanations. Sign Up Here

  16. Question 16

    ______ is defined as excess of total expenditure over total receipts excluding borrowings during a fiscal year.
    1. Income deficit
    2. Fiscal deficit
    3. Structural deficit
    4. Gross Primary deficit
    View explanation

    Sign In to See Explanations. Sign Up Here

  17. Question 17

    Expenditure of the government on health facilities, education and fixed-asset acquisition is termed as ______.
    1. Capital expenditure
    2. Non-plan revenue expenditure
    3. Plan expenditure
    4. Revenue expenditure
    View explanation

    Sign In to See Explanations. Sign Up Here

  18. Question 18

    Which of the following are the major objectives of governments engaged in the budgetary process in India?
    I. Stabilising the level of aggregate demand in the economy.
    II. Redistributing incomes of people as per constitutional principles.
    III. Floating schemes to appeal to citizens in a democratic way on a regular basis.
    IV. Allocating funds to various economic activities.
    1. Only I, II and III
    2. Only I and II
    3. Only I, II and IV
    4. All I, II, III and IV
    View explanation

    Sign In to See Explanations. Sign Up Here

  19. Question 19

    Which of the following is NOT a part of the capital receipts?
    1. Disinvestment
    2. Recovery of loan
    3. Tax revenue
    4. Borrowing
    View explanation

    Sign In to See Explanations. Sign Up Here

  20. Question 20

    What is a revenue deficit in the government budget?
    1. The excess of expenditure over revenue, excluding interest payments on debt.
    2. The excess of revenue over expenditure, excluding interest payments on debt.
    3. The excess of revenue over expenditure, including interest payments on debt.
    4. The excess of expenditure over revenue, including interest payments on debt.
    View explanation

    Sign In to See Explanations. Sign Up Here