12th CBSE Economics - Government Budget Four Mark Model Question Paper
By QB365 on 04 Oct, 2019
Government Budget
Government Budget Four Mark Model Question Paper
12th Standard CBSE
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Reg.No. :
Introductory Micro and Macroeconomics
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Explain, why public goods must be provided by the government?
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Differentiate between balanced budget and surplus budget.
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Explain the role of government budget in bringing economic stability.
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State three objectives of a government budget.
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Discuss any four objectives of a government budget?
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What is disinvestment? Does it refer to revenue receipts or capital receipts of the government? Give an example.
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Distinguish between revenue expenditure and capital expenditure in a government budget.Give an example of each.
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Giving reasons categorise the following into revenue receipts and capital receipts.
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What is revenue deficit?Explain its implications.
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Give the relationship between revenue deficit and the fiscal deficit.
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Government Budget Four Mark Model Question Paper Answer Keys
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public goods such as parks,roads, water supply, bridges,national defence, etc are the goods which people urgently need for the day-to-day living,but market mechanism cannot produce these goods in sufficient quantities, due to its features of sufficient quantities, due to its features of non-rivalrous and non-excludable in consumption.Therefore,these goods need to be provided by the government.
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Balanced budget when the estimated receipts are equal to the estimated expenditure in government budget, it is termed as a balanced budget
Surplus budget when the estimated receipts are more than the estimated expenditure in government budget, it is termed as a surplus budget.
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Budget is a comprehensive statement of the expected receipts and expenditure of the government during a financial year (1st April to 31st march)..
Following are the principal objectives that the government pursues trough the budget:
(i) Reallocation of resources The government,through its budgetary policy reallocate resources, so that social and economic objectives can be met.
(ii) Redistribution of income and wealth Government through facial tools of taxation and transfer payment brings fair distribution of income.Equitable distribution of income and wealth is a way to bring social justice.
(iii) Economic stability The government tries to prevent business fluctuations and maintain price and employment stability. Economic stability stimulates inducement to invest and increases to invest and increases the rate of growth and development.
(iv) Economic growth The growth rate of a country depends on the rate of savings and investment.Therefore the roles that are assigned to budgetary policy in this regard are to create conditions for increase in savings and investment.
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Budget is a comprehensive statement of the expected receipts and expenditure of the government during a financial year (1st April to 31st march)..
Following are the principal objectives that the government pursues trough the budget:
(i) Reallocation of resources The government,through its budgetary policy reallocate resources, so that social and economic objectives can be met.
(ii) Redistribution of income and wealth Government through facial tools of taxation and transfer payment brings fair distribution of income.Equitable distribution of income and wealth is a way to bring social justice.
(iii) Economic stability The government tries to prevent business fluctuations and maintain price and employment stability. Economic stability stimulates inducement to invest and increases to invest and increases the rate of growth and development.
(iv) Economic growth The growth rate of a country depends on the rate of savings and investment.Therefore the roles that are assigned to budgetary policy in this regard are to create conditions for increase in savings and investment.
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Budget is a comprehensive statement of the expected receipts and expenditure of the government during a financial year (1st April to 31st march)..
Following are the principal objectives that the government pursues trough the budget:
(i) Reallocation of resources The government,through its budgetary policy, reallocate resources, so that social and economic objectives can be met.
(ii) Redistribution of income and wealth Government through facial tools of taxation and transfer payment brings fair distribution of income.Equitable distribution of income and wealth is a way to bring social justice.
(iii) Economic stability The government tries to prevent business fluctuations and maintain price and employment stability. Economic stability stimulates inducement to invest and increases to invest and increases the rate of growth and development.
(iv) Economic growth The growth rate of a country depends on the rate of savings and investment.Therefore the roles that are assigned to budgetary policy in this regard are to create conditions for increase in savings and investment
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Disinvestment refers to reducing the holdings of the government in public sector undertaking in part or in full. e.g. The Government of India is undertaking disinvestment by selling its shares in the Maruti Udyog. It is a capital receipt of the government, as it reduces assets of the government.
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Basis Revenue expenditure Capital expenditure Meaning These are those expenditures of government which neither cause increase in government assets nor cause any reduction in government liabilities. It is the expenditure which leads to either increase in government assets or reduction in government liabilities. Purpose It is spent on normal functioning of government departments and various provisions. It is spent on acquisition of assets,repayment of borrowings and granting of loans and advances. Nature It is a recurring expenditure. It is non-recurring expenditure. Example Expenditure on old age pensions,expense on administrative services,expense on national security.expense on health and education.etc. Expenditure on the construction of national highways.repayment of government loans, establishment of factories -
(i) Dividents on investment made by government
(ii) Sale of public sector undertaking
(i) Dividents on investment made by government It is a revenue receipt, as it does not add to the liability or not lead to reduction in assets.
(ii) Sale of public sector undertaking It is a capital receipt,as it involves reduction in assets.
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When revenue receipts are less than the revenue expenditure in government budget, this shortfall of receipts is known as revenue deficit.
Implications of revenue deficit are:
(i)High revenue deficit shows accumulated and recurring expenses of government on repayment expenses of government on repayment of loans,expenses on defence, etc.
(ii)The revenue deficit is managed by borrowings or disinvestment.Hence, High revenue deficit either increases government liabilities or causes reduction in government assets.
(iii) High revenue deficit leads to inflationary situation in the economy, as high government expenditure increases the Aggregate Demand of the economy.
(iv)High revenue deficit implies high future burden of loan and interest payments on government.
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Fiscal deficit refers to the situation of excess of total expenditure over total receipts (excluding borrowings) where total expenditure and receipts includes both revenue deficit is part of fiscal deficit, wherein fiscal deficit is a border concepts.