Macroeconomics: Government Budget and the Economy

Topics in this chapter

• Budget Objectives and Functions
• Budget Receipts and Expenditure
• Budget Deficits and Public Debt
• Fiscal Policy and Macroeconomic Stability

Cheat sheet

Practice questions

1. Question 1Q-B4CA0D

   Which one of the following is a capital receipt of the government?

   1. A.Recovery of loans granted by the government
   2. B.Income tax collected from households
   3. C.Fees received for government services
   4. D.Dividends received from public sector enterprises
   See the answer and solution
2. Question 2Q-18E062

   A government's total expenditure is ₹1,000 crore, revenue receipts are ₹650 crore and non-debt capital receipts are ₹100 crore. What is its fiscal deficit?

   1. A.₹150 crore
   2. B.₹250 crore
   3. C.₹350 crore
   4. D.₹750 crore
   See the answer and solution
3. Question 3Q-02AC3E

   For a government, revenue receipts are ₹900 crore, revenue expenditure is ₹1,000 crore, total expenditure is ₹1,400 crore, non-debt capital receipts are ₹150 crore and interest payments are ₹80 crore. Which statement is correct?

   1. A.Revenue deficit is ₹100 crore, fiscal deficit is ₹350 crore and primary deficit is ₹270 crore.
   2. B.Revenue deficit is ₹100 crore, fiscal deficit is ₹250 crore and primary deficit is ₹170 crore.
   3. C.Revenue deficit is ₹350 crore, fiscal deficit is ₹100 crore and primary deficit is ₹270 crore.
   4. D.Revenue deficit is ₹80 crore, fiscal deficit is ₹350 crore and primary deficit is ₹100 crore.
   See the answer and solution
4. Question 4Q-FD8531

   How can the government budget help maintain economic stability during a recession?

   See the answer and solution
5. Question 5Q-25706D

   A revenue deficit arises when:

   1. A.Revenue expenditure exceeds revenue receipts
   2. B.Capital expenditure exceeds capital receipts
   3. C.Total receipts exceed total expenditure
   4. D.Non-debt capital receipts exceed revenue expenditure
   See the answer and solution