Fiscal Policy & Budget

Q1. Fiscal deficit is defined as:

A. Total expenditure – Total receipts excluding borrowings B. Revenue expenditure – Revenue receipts C. Capital expenditure – Capital receipts D. Only interest payments

Q2. Which of the following is a non-tax revenue receipt?

A. Corporation tax B. GST C. Dividends from PSUs and interest receipts D. Customs duty

Q3. The FRBM Act primarily aims to:

A. Increase fiscal deficit B. Ensure fiscal discipline and inter-generational equity C. Eliminate all subsidies D. Fix the repo rate

Q4. Primary deficit is equal to:

A. Fiscal deficit – Interest payments B. Revenue deficit – Interest payments C. Fiscal deficit + Interest payments D. Budget deficit – Interest

Q5. Which of the following is an example of capital expenditure?

A. Salary of government employees B. Interest payments C. Construction of a new highway D. Subsidies on food

Q6. GST in India is a:

A. Origin-based tax B. Destination-based tax C. Only central tax D. Turnover tax on all stages without credit

Q7. Crowding-out effect refers to:

A. Government borrowing raising interest rates and reducing private investment B. Increase in private investment due to government spending C. Only export crowding D. Reduction in fiscal deficit

Q8. Which body decides GST rates in India?

A. RBI B. GST Council C. NITI Aayog D. Finance Commission only

Q9. Revenue deficit indicates:

A. Excess of revenue expenditure over revenue receipts B. Excess of capital expenditure over capital receipts C. Total borrowing requirement D. Primary deficit

Q10. Effective Revenue Deficit is:

A. Revenue deficit minus grants for creation of capital assets B. Fiscal deficit minus interest C. Primary deficit plus interest D. Budget deficit

Q11. Which of the following is a progressive tax?

A. GST on all goods at same rate B. Income tax with increasing slabs C. Specific excise duty D. Poll tax

Q12. The Laffer Curve illustrates the relationship between:

A. Tax rates and tax revenue B. Inflation and unemployment C. Fiscal deficit and growth D. Interest rate and investment

Q13. Which of the following is NOT a component of the Union Budget?

A. Revenue Budget B. Capital Budget C. Monetary Policy Statement D. Finance Bill

Q14. Counter-cyclical fiscal policy means:

A. Increasing spending during boom B. Increasing spending / cutting taxes during recession and vice versa C. Always running surplus D. Only using monetary tools

Q15. Which of the following taxes was subsumed under GST?

A. Basic Customs Duty B. Corporation Tax C. Central Excise (on most goods) and Service Tax D. Income Tax

Q16. The concept of Zero-based budgeting requires:

A. Continuing previous year's allocations B. Justifying every item of expenditure from scratch C. Only capital budgeting D. No budgeting

Q17. Which of the following increases the fiscal deficit?

A. Increase in tax collections B. Increase in disinvestment receipts C. Increase in government expenditure without matching non-debt receipts D. Reduction in subsidies

Q18. The Finance Commission is constituted to recommend:

A. Repo rate B. Distribution of tax revenues between Centre and States C. Monetary policy stance D. GST rates only

Q19. Which of the following is a non-debt creating capital receipt?

A. Market borrowings B. External commercial borrowings C. Disinvestment proceeds D. Treasury bills

Q20. Automatic stabilisers in fiscal policy include:

A. Discretionary stimulus packages only B. Progressive taxation and unemployment benefits that vary with the cycle C. Only capital expenditure D. Fixed subsidies

Q21. Which deficit is the most comprehensive measure of the government's borrowing requirement?

A. Revenue deficit B. Primary deficit C. Fiscal deficit D. Budgetary deficit (old concept)

Q22. GST Compensation Cess was levied to:

A. Fund the general budget B. Compensate states for revenue loss due to GST implementation for a limited period C. Replace income tax D. Fund RBI

Q23. Which of the following is true about Off-budget borrowings?

A. They are always included in fiscal deficit B. They can understate the true fiscal deficit if not properly accounted C. They are illegal D. They reduce the debt-GDP ratio automatically

Q24. The conventional FRBM target for the Centre's fiscal deficit has been around:

A. 1% of GDP B. 3% of GDP C. 6% of GDP D. 10% of GDP

Q25. Which of the following is a direct tax?

A. GST B. Customs duty C. Income tax D. Excise duty on fuel

Q26. Public debt of the government includes:

A. Only external debt B. Internal and external debt liabilities of the government C. Only RBI debt D. Private corporate debt

Q27. Which of the following statements about subsidies is correct?

A. All subsidies are capital expenditure B. Food, fertiliser and petroleum subsidies are major revenue expenditure items C. Subsidies always increase capital formation D. Subsidies are not part of the budget

Q28. The concept of Twin deficits usually refers to:

A. Fiscal deficit and Current Account deficit B. Revenue deficit and primary deficit C. Budget deficit and trade deficit only D. Fiscal deficit and revenue surplus

Q29. Which of the following can help reduce the fiscal deficit without cutting expenditure?

A. Increasing tax compliance and widening the tax base B. Increasing borrowings C. Printing more money only D. Reducing GDP

Q30. In the context of the Budget, Guillotine refers to:

A. Cutting all expenditures B. Voting on remaining demands for grants without detailed discussion due to lack of time C. Rejecting the budget D. Only capital budget approval

Q31. Which of the following is true regarding State budgets in India?

A. States cannot levy any tax B. States have their own budgets and receive tax devolution and grants from the Centre C. States cannot borrow D. State budgets are prepared by RBI

Q32. Capital receipts that create debt include:

A. Recovery of loans B. Disinvestment C. Market borrowings and external loans D. Interest receipts

Q33. Which of the following best describes Fiscal consolidation?

A. Increasing fiscal deficit B. Reducing fiscal deficit and debt in a sustainable manner C. Only increasing capital expenditure D. Printing money to finance deficit

Q34. Higher tax devolution to states primarily affects:

A. Monetary policy B. Vertical distribution of resources between Centre and States C. Repo rate D. CRR

Q35. Which of the following is an example of a merit good often subsidised by the government?

A. Luxury cars B. Primary education and basic healthcare C. Tobacco D. Imported cosmetics

Q36. Budget transparency is enhanced by:

A. Hiding off-budget items B. Clear classification of expenditures and disclosure of contingent liabilities C. Only publishing the speech D. Avoiding parliamentary discussion

Q37. Which of the following statements about GST is incorrect?

A. It has a dual structure (Centre and States) B. Input Tax Credit is a key feature C. It is levied only by the Central Government D. GST Council is a constitutional body

Q38. Interest payments form a major part of:

A. Capital expenditure B. Revenue expenditure C. Non-tax revenue D. Disinvestment proceeds

Q39. Which of the following is a tool of expansionary fiscal policy?

A. Increase in tax rates B. Increase in government expenditure or cut in taxes C. Reduction in government spending D. Increase in CRR by RBI

Q40. The term Pump priming is associated with:

A. Monetary contraction B. Stimulating a depressed economy through government spending C. Only tax increases D. Exchange rate management

Q41. Which of the following is true about the relationship between fiscal deficit and inflation?

A. There is never any link B. Large deficits financed by money creation can be inflationary C. Fiscal deficit always reduces inflation D. Only external debt causes inflation

Q42. The Contingency Fund of India is placed at the disposal of:

A. RBI Governor B. President of India C. Finance Minister only D. CAG

Q43. Which of the following improves the quality of fiscal deficit?

A. Higher share of revenue deficit in fiscal deficit B. Higher share of capital expenditure financed by the deficit C. Only interest payments D. Increase in off-budget borrowing

Q44. Which of the following is NOT typically considered a tax expenditure?

A. Revenue foregone due to exemptions and deductions B. Actual cash subsidy payment C. Preferential tax treatment D. Tax incentives for investment

Q45. In a federal system, vertical fiscal imbalance refers to:

A. Imbalance between states B. Mismatch between revenue-raising powers and expenditure responsibilities of different tiers C. Only local body finances D. Balance of payments imbalance

Q46. Which of the following can be a consequence of persistently high fiscal deficits?

A. Lower interest rates always B. Higher public debt, potential crowding out and rating pressure C. Automatic increase in exports D. Reduction in money supply

Q47. The Golden Rule of public finance often suggests that:

A. Government should only borrow to finance capital expenditure over the cycle B. Government should never borrow C. All expenditure should be tax-financed every year D. Deficits should equal money growth

Q48. Which of the following documents is presented along with the Union Budget?

A. Only the Finance Bill B. Budget Speech, Annual Financial Statement, Demands for Grants, Finance Bill and explanatory documents C. Only Economic Survey D. Only Monetary Policy Report

Q49. Which of the following is a feature of a good tax system according to classical principles?

A. Arbitrary rates B. Certainty, convenience, economy and equity (Adam Smith's canons) C. Maximum complexity D. Only regressive taxes

Q50. If the government runs a primary surplus but a fiscal deficit, it implies:

A. Interest payments exceed the primary surplus B. There is no debt C. Revenue is higher than all expenditure D. Capital expenditure is zero

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