Free Understanding the Budget 03 Practice Test - 12th Grade - Commerce 

Question 1

Which one of the situations is more desirable?

Situation ASituation BRevenue - 100 croresRevenue - 500 croresExpenditure - 100 croresExpenditure - 100 crores

A.

Situation A

B.

Situation B

C.

Both are equally desirable

D.

None of the above

SOLUTION

Solution : B

A surplus budget is preferred over a balanced budget as this allows more money to be invested in liquid savings assets or illiquid assets like land. Situation B depicts a surplus budget whereas Situation A is a balanced budget. Therefore, Situation B is more desirable.

Question 2

In case of a natural calamity such as an earthquake, money can be withdrawn from the:

A.

Public Accounts

B.

Contingency Fund of India

C.

Consolidated Fund of India

D.

Any of the above

SOLUTION

Solution : B

In case of a natural calamity such as an earthquake, money can be withdrawn from the Contingency Fund of India. 

Question 3

In the context of government budget, which of the following statements is correct?

A.

Budget is a statement of expected annual receipts and expenditures of the government.

B.

It is a detailed account of actual receipts and expenditures of the government in a financial year.

C.

It offers a detailed description of achievements of the government during the five year plans. 

D.

It indicates the balance of payments status of the domestic economy.

SOLUTION

Solution : A

Budget mentions expected annual receipts and expenditures of the government.

Question 4

Which of the following are the objectives of government budget?

A.

Redistribution of income and wealth

B.

Economic stability

C.

GDP growth

D.

All of these

SOLUTION

Solution : D

All of the options are objectives of the government budget.

Question 5

A tax, the burden of which can be shifted on to others, is called:

A.

indirect tax

B.

direct tax

C.

wealth tax

D.

none of these

SOLUTION

Solution : A

A tax, the burden of which can be shifted on to others, is called indirect tax.

Question 6

Tax that is imposed on value added at the various stages of production is known as

A.

corporate profit tax

B.

direct personal tax

C.

value-added tax

D.

none of these

SOLUTION

Solution : C

Tax that is imposed on value added at the various stages of production is known as value-added tax.

Question 7

Taxes like wealth tax and gift tax in India which carry their significance only on paper and have no significance in terms of revenue yield are called

A.

indirect tax

B.

direct tax

C.

value added tax

D.

paper taxes

SOLUTION

Solution : D

Taxes like wealth tax and gift tax in India which carry their significance only on paper and have no significance in terms of revenue yield are called paper taxes.

Question 8

Which of the following is NOT a non-tax receipt?

A.

Fees

B.

Fines

C.

Gift tax

D.

Grants and donations

SOLUTION

Solution : C

Gift tax belonged to direct taxes which does not have much significance in terms of revenue yield. It is not a non-tax receipt. 

Question 9

The government budget of a hypothetical economy presents the following information, which of the following value represents Budgetary Deficit? (all fig. in crores of Rupees).

A. Revenue Expenditure = 25,000

B. Capital Receipts = 30,000

C. Capital Expenditure = 35,000

D. Revenue Receipts = 20,000

E. Interest Payments = 10,000

F. Borrowings = 20,000

A.

Rs 12,000 crore

B.

Rs 10,000 crore

C.

Rs 20,000 crore

D.

None of the above

SOLUTION

Solution : B

Budgetary Deficit = Total Expenditures - Total Receipts

= (Revenue Expenditure + Capital Expenditure) - (Revenue Receipts + Capital Receipts)

= (Rs 25,000 crore + Rs 35,000 crore) - (Rs 20,000 + Rs 30,000 crore)

= Rs 60,000 crore - Rs 50,000 crore

= Rs 10,000 crore

Question 10

Which of the following statement is true?

A.

Loans from IMF are revenue receipts.

B.

A higher revenue deficit necessarily leads to a higher fiscal deficit. 

C.

Borrowing by a government represents a situation of fiscal deficit. 

D.

Revenue deficit is the excess of capital receipts over the revenue receipts. 

SOLUTION

Solution : C

When there is a fiscal deficit, the government gets to borrow.