Important Questions Class 12 Economics Chapter 5 - Government Budget and the Economy

Important questions with answers for CBSE Class 12 Economics Chapter 5 – Government Budget and the Economy are outlined by expert economics teachers from the latest version of CBSE (NCERT) books.

CBSE Class 12 Macroeconomics Chapter- 5 Important Questions

Question 1

A direct tax is a tax that is imposed on which of the following?

a. Corporations only

b. Individuals only

c. None of these

d. Individuals and Corporations

Answer:

d. Individuals and corporations

Question 2

Which of these implements budgetary policies?

a. Foreign sector

b. Finance ministry

c. Government

d. Private sector

Answer:

c. Government

Question 3

What is a budget?

Answer:

A budget is an annual statement of the estimated government receipts and expenditures over the fiscal year. A particular fiscal year in an economy (mainly in India) runs from 1st April to 31st March.

Question 4

Mention the four different concepts of deficit.

Answer:

The four different concepts of deficit are as follows:

•     Budget deficit
•     Revenue deficit
•     Primary deficit
•     Fiscal deficit

Question 5

What are the two types of revenue receipts?

Answer:

The two types of revenue receipts are as follows:

•     Tax revenue
•     Non-tax revenue

Question 6

What are direct and indirect taxes? Explain with examples.

Answer:

Direct taxes are the taxes that are paid to the government by the taxpayer (citizens). It is a tax that is applied to individuals and establishments straight by the government.

Examples: Income tax, corporation tax, wealth tax, etc.

Indirect taxes are applied to the production or sale of goods and services. These are originally paid to the government by an agent, who then adds the amount of the tax-funded to the value of the goods/services and passes on the total amount to the end-user.

Examples: Sales tax, service tax, excise duty, etc.

Question 7

Which of the following is not a source of revenue receipts for the government?

 a. Tax revenue

 b. Income tax

 c. Wealth tax

 d. Profits

Answer:

d. Profits

Question 8

Mention the two types of taxes.

Answer:

There are primarily two significant types of taxes, namely direct and indirect taxes.

•     Direct taxes include interest tax, income tax, wealth tax, etc.
•     Indirect taxes include excise duties, customs duties, sales tax, etc.

Question 9

What are the main items of the capital receipt?

Answer:

The main items that are sorted under capital receipts are as follows:

•     Borrowings by the government
•     Loans received from international financial institutions and foreign governments
•     Market loans

Question 10

Give two examples of developmental expenditure.

Answer:

The two examples of developmental expenditure are as follows:

•     Economic services of railways and postal services
•     Grants in aid to state and union territories

Question 11

Give two examples of non-developmental expenditures.

Answer:

Defence and interest on payments

Question 12

What is a disinvestment?

a. Capital expenditure

b. Revenue expenditure

c. Capital receipts

d. Revenue receipts

Answer:

c. Capital receipts

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