SUNIL PANDA – THE EDUCATOR

GOVERNMENT BUDGET
CUET 2025
MOST IMPORTANT QUESTIONS
Q.1) Which one is not the objective of government budget?

a) Reallocation of resources

b) Economic stability

c) Increase in regional disparities

d) Economic growth

Q.2) Escheat is an example of:

a) Capital receipt

b) Revenue receipt

c) Capital expenditure

d) Revenue expenditure

Q.3) From the following data calculate Primary deficit

Particulars Amount

Revenue expenditure 22,250

Capital expenditure 28,000

Revenue receipts 17,750

Capital receipts (net borrowing) 20,000

Interest payment 5,000

Borrowings 12,500

a) 7,500

b) 12,500

c) 5,000

d) 17,750

Q.4) Receipts of the government that are non-redeemable and cannot be reclaimed from the government, are under
which type of revenues of government?

a) Capital receipts

b) Tax revenue

c) Revenue receipts

d) Non-tax revenue
Q.5) One kind of deficit in the annual budget will have to be financed through borrowings it indicates the total
borrowing requirement of the government from all sources it is known as:

a) Money deficit

b) Fiscal deficit

c) Macro deficit

d) Micro deficit

Q.6) Revenue Receipts in the government budget include:

A. Government borrowings

B. Tax revenue

C. Interest receipts on loans by government

D. Dividends earned by government on its investment

Choose the correct answer from the options given below:

a) A, B, C and D only

b) B, C, and D only

c) C and D only

d) A and D only

Q.7) What needs to be subtracted from gross fiscal deficit to get gross primary deficit?

a) Revenue expenditure

b) Net interest liabilities

c) Recovery of loans

d) Non tax revenue

Q.8) Redistribution function of government budget

A. Budget proposal

B. More tax on progressive taxation

C. Government plan to redistribute

D. Bring the fair society

E. Government expenditure on public goods

Choose the correct answer from the options given below:

a) B, D, C, A, E

b) E, C, D, B, A

c) A, C, E, D,B

d) C, A, B, E, D

Q.9) Deficit Reduction: Government deficit can be reduced by an increase in taxes or reduction in expenditure. In
India, government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are
regressive in nature - they impact all income groups equally). There has also been an attempt to raise receipts
through the sale of shares in PSUs. However, the major thrust has been towards reduction in government
expenditure. This could be achieved through making government activities more efficient through better planning of
programmes and better administration. A recent study by the Planning Commission has estimated that to transfer Rel
to the poor, government spends 23.65 in the form of food subsidy, showing that cash transfers would lead to increase
in welfare. The other way is to change the scope of the government by withdrawing from some of the areas where it
operated before. Cutting back government programmes in vital areas like agriculture, education, health, poverty
alleviation, etc. would adversely affect the economy. Governments in many countries run huge deficits forcing them
to eventually put in place self-imposed constraints of not increasing expenditure over pre-determined level. These
will have to be examined keeping in view the above factors. We must note that larger deficits do not always signify a
more expansionary fiscal policy. The same fiscal measures can give rise to a large or small deficit, depending on the
state of the economy. For example, if an economy experiences a recession and GDP falls, tax revenues fall because
firms and households pay lower taxes when they earn less. This means that the deficit increases in a recession and
falls in a boom, even with no change in fiscal policy.

The reason for Deficit in Budget is:

a) Expenditure exceeds revenue

b) Revenue exceeds expenditure

c) Expenditure and Revenue are same

d) No role of revenue and expenditure

Q.10) Deficit Reduction: Government deficit can be reduced by an increase in taxes or reduction in expenditure. In
India, government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are
regressive in nature - they impact all income groups equally). There has also been an attempt to raise receipts
through the sale of shares in PSUs. However, the major thrust has been towards reduction in government
expenditure. This could be achieved through making government activities more efficient through better planning of
programmes and better administration. A recent study by the Planning Commission has estimated that to transfer Rel
to the poor, government spends 23.65 in the form of food subsidy, showing that cash transfers would lead to increase
in welfare. The other way is to change the scope of the government by withdrawing from some of the areas where it
operated before. Cutting back government programmes in vital areas like agriculture, education, health, poverty
alleviation, etc. would adversely affect the economy. Governments in many countries run huge deficits forcing them
to eventually put in place self-imposed constraints of not increasing expenditure over pre-determined level. These
will have to be examined keeping in view the above factors. We must note that larger deficits do not always signify a
more expansionary fiscal policy. The same fiscal measures can give rise to a large or small deficit, depending on the
state of the economy. For example, if an economy experiences a recession and GDP falls, tax revenues fall because
firms and households pay lower taxes when they earn less. This means that the deficit increases in a recession and
falls in a boom, even with no change in fiscal policy.

Increase in taxes or reduction in public expenditure in Indian may help in reducing

a) Balanced

b) Surplus

c) Deficit

d) Exchange rate

Q.11) Deficit Reduction: Government deficit can be reduced by an increase in taxes or reduction in expenditure. In
India, government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are
regressive in nature - they impact all income groups equally). There has also been an attempt to raise receipts
through the sale of shares in PSUs. However, the major thrust has been towards reduction in government
expenditure. This could be achieved through making government activities more efficient through better planning of
programmes and better administration. A recent study by the Planning Commission has estimated that to transfer Rel
to the poor, government spends 23.65 in the form of food subsidy, showing that cash transfers would lead to increase
in welfare. The other way is to change the scope of the government by withdrawing from some of the areas where it
operated before. Cutting back government programmes in vital areas like agriculture, education, health, poverty
alleviation, etc. would adversely affect the economy. Governments in many countries run huge deficits forcing them
to eventually put in place self-imposed constraints of not increasing expenditure over pre-determined level. These
will have to be examined keeping in view the above factors. We must note that larger deficits do not always signify a
more expansionary fiscal policy. The same fiscal measures can give rise to a large or small deficit, depending on the
state of the economy. For example, if an economy experiences a recession and GDP falls, tax revenues fall because
firms and households pay lower taxes when they earn less. This means that the deficit increases in a recession and
falls in a boom, even with no change in fiscal policy.

Reduction in government expenditure can be achieved through

a) Better studies

b) Better neighbours

c) Better agriculture

d) Better administration

Q.12) Deficit Reduction: Government deficit can be reduced by an increase in taxes or reduction in expenditure. In
India, government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are
regressive in nature - they impact all income groups equally). There has also been an attempt to raise receipts
through the sale of shares in PSUs. However, the major thrust has been towards reduction in government
expenditure. This could be achieved through making government activities more efficient through better planning of
programmes and better administration. A recent study by the Planning Commission has estimated that to transfer Rel
to the poor, government spends 23.65 in the form of food subsidy, showing that cash transfers would lead to increase
in welfare. The other way is to change the scope of the government by withdrawing from some of the areas where it
operated before. Cutting back government programmes in vital areas like agriculture, education, health, poverty
alleviation, etc. would adversely affect the economy. Governments in many countries run huge deficits forcing them
to eventually put in place self-imposed constraints of not increasing expenditure over pre-determined level. These
will have to be examined keeping in view the above factors. We must note that larger deficits do not always signify a
more expansionary fiscal policy. The same fiscal measures can give rise to a large or small deficit, depending on the
state of the economy. For example, if an economy experiences a recession and GDP falls, tax revenues fall because
firms and households pay lower taxes when they earn less. This means that the deficit increases in a recession and
falls in a boom, even with no change in fiscal policy.

Reducing expenditure on vital sector like agriculture, education, healthcare, etc. to reduce the deficit may result in

a) No effect on economy

b) New budget will be prepared

c) Adverse effect on economy

d) Positive effect on economy

Q.13) Deficit Reduction: Government deficit can be reduced by an increase in taxes or reduction in expenditure. In
India, government has been trying to increase tax revenue with greater reliance on direct taxes (indirect taxes are
regressive in nature - they impact all income groups equally). There has also been an attempt to raise receipts
through the sale of shares in PSUs. However, the major thrust has been towards reduction in government
expenditure. This could be achieved through making government activities more efficient through better planning of
programmes and better administration. A recent study by the Planning Commission has estimated that to transfer Rel
to the poor, government spends 23.65 in the form of food subsidy, showing that cash transfers would lead to increase
in welfare. The other way is to change the scope of the government by withdrawing from some of the areas where it
operated before. Cutting back government programmes in vital areas like agriculture, education, health, poverty
alleviation, etc. would adversely affect the economy. Governments in many countries run huge deficits forcing them
to eventually put in place self-imposed constraints of not increasing expenditure over pre-determined level. These
will have to be examined keeping in view the above factors. We must note that larger deficits do not always signify a
more expansionary fiscal policy. The same fiscal measures can give rise to a large or small deficit, depending on the
state of the economy. For example, if an economy experiences a recession and GDP falls, tax revenues fall because
firms and households pay lower taxes when they earn less. This means that the deficit increases in a recession and
falls in a boom, even with no change in fiscal policy.

An economy is experiencing the recession and presented deficit budget, GDP and tax revenue falls as households and
firm have to

a) Pay higher tax

b) Pay lower tax

c) Pay zero tax

d) Migrate from the country

Q.14) Which deficit includes only such transaction that affect the current income and expenditure of the
government?

a) Revenue deficit

b) Fiscal deficit

c) Primary deficit

d) Budget deficit

Q.15) Which of the following are sources of revenue expenditure by the government?

A. Repayment of loans

B. Expenditure on defence services

C. Central assistance for states

D. Interest payments

E. Lending to commercial banks

Choose the correct answer from the option given below:

a) A, B and C only

b) B, C, and E only

c) B, C, and D only

d) A, C and E only

Q.16) ____________ is a revenue receipt of the government

a) Profits of LIC, a public enterprise

b) Amount borrowed from Japan for construction of bullet train

c) Recovery of loans
d) Sale of 40% shares of a public sector undertaking to a private enterprise

Q.17) Which is not an implication of fiscal deficit?

a) Debt trap

b) Stabilisation

c) Inflation

d) Foreign dependency

Q.18) Match List I with List II

List I List II

A. Progressive tax I. Tax on imported and exported goods

B. Proportional tax II. Income tax

C. Wealth tax III. Tax on firms

D. Custom duty IV. Paper tax

Choose the correct answer from the options given below:

a) A-I, B-II, C-III, D-IV

b) A-I, B-II, C-IV, D-III

c) A-II, B-III, C-IV, D-I

d) A-II, B-III, C-I, D-IV

Q.19) Match List I with List II

List I List II

A. Tax revenue I. Capital receipts

B. Construction of building II. Import duty

C. Recovery of loan III. Borrowings

D. Fiscal deficit IV. Capital expenditure

Choose the correct answer from the options given below:

a) A-I, B-III, C-II, D-IV

b) A-III, B-II, C-IV, D-I

c) A-IV, B-I, C-III, D-II

d) A-II, B-IV, C-I, D-III

Q.20) Revenue deficit will be calculated through _____________.

a) Total expenditure - Revenue receipts

b) Fiscal deficit - Interest payments

c) Fiscal deficit - Revenue receipts

d) Revenue expenditure - Revenue receipts

Q.21) Determine fiscal deficit from following:

Revenue receipts = 20 crores

Revenue expenditure = 30 crores

Capital expenditure 40 crores

Borrowing = 15 crores

a) 15 crores

b) 20 crores

c) 30 crores

d) 50 crores

Q.22) Identify the correct formulae:

A. Gross fiscal deficit = Total expenditure of the government - (Revenue receipts + Non debt creating capital receipts)

B. Gross fiscal deficit = Total expenditure of the government -Total receipts

C. Gross fiscal deficit = Gross primary deficit -Net interest liabilities

D. Gross fiscal deficit = net borrowing at home +Borrowing from RBI + Borrowing from abroad

E. Gross fiscal deficit = Borrowing from RBI + Borrowing from abroad

Choose the correct answer from the options given below:

a) A and D only

b) A and C only

c) C and D only

d) D and B only

Q.23) Match List I with List II

List I (Elements) List II (Features)

A. Annual Financial Statement I. Create liabilities or reduce financial assets
B. Capital Receipts II. Trade surplus
C. Capital Payment III. Main budget document
D. Export > Import IV. Create financial assets or reduce liabilities
Choose the correct answer from the options given below:

a) A-I, B-II, C-III, D-IV

b) A-III, B-I, C-IV, D-II

c) A-I, B-II, C-IV, D-III

d) A-III, B-IV, C-I, D-II

Q.24) Article 112 deals with:

a) Consolidated Fund of India

b) Public Account
c) Union Budget

d) Contingent Fund

Q.25) All those elements which create liability and decrease the assets of government are known as:

a) Capital Receipts

b) Capital Payments

c) Revenue Receipts

d) Revenue Payments

Answer Key

1-C, 2-B, 3-A, 4-C, 5-B, 6-B, 7-B, 8-D, 9-A, 10-C, 11-D, 12-C, 13-B, 14-A, 15-C, 16-A, 17-B, 18-C, 19-D, 20-D, 21-A, 22-A, 23-B, 24-C, 25-A