Download government budget - Indian School Al Wadi Al Kabir

INDIAN SCHOOL AL WADI AL KABIR
GOVERNMENT BUDGET AND ECONOMY
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What are budget receipts?
What are revenue receipts?
What are capital receipts?
Define tax.
Define direct tax. Give two examples of direct taxes.
Define indirect tax. Give two examples of indirect taxes.
A tax is called an indirect tax when the final burden of the tax falls on someone other than
the person who is liable to pay the tax or taxes. Sales tax and excise duty are examples of
indirect taxes.
7. Why the borrowings by the government are called capital receipts?
8. What is budgetary deficit?
9. What is deficit financing?
Printing new currency notes by central bank to meet the budgetary deficit is called deficit
financing.
10. What is fiscal deficit?
11. What is meant by revenue deficit?
12. What is primary deficit?
13. Why is repayment of loan a capital expenditure?
14. Why is payment of interest a revenue expenditure?
15. Why are borrowings a capital Receipt?
16. What are Non – tax revenue receipts?
17. Fiscal deficit in a government budget refers to;
a.Short fall in taxes b. Short fall in disinvestment c.Disinvestment requirement d.Borrowings
requirements.
18. State any two sources of Non – tax revenue receipts.
(i)Interest, (ii) Dividends, (iii) Profits, (iv) External grants.
19. What is a debt trap?
It is vicious circle in which the government takes new loans to repay its earlier loans/interest.
20. What is balanced budget multiplier?
It is the ratio of increase in income to increase in government expenditure financed by taxes.
21. What does zero primary deficit mean?
22. Spot the capital receipt; a. Tax received b.External grants received c.Dividend received
d.Disinvestment.
23. Steps taken through the government budget can influence; a. Inequalities b. Allocation of
resources c. Inflation d. All the above.
24. ‘The fiscal deficit gives the borrowing requirement of the government’. Elucidate.
To finance hurdles are overcome with the fiscal deficit, the government need money, so
government has to borrow the money for fiscal deficit. It increases the borrowing of
government and governments have to pay more interest on it. Therefore, fiscal deficit
generates the borrowing requirements to the government.
25. Give the relationship between the revenue deficit and the fiscal deficit.
26. The worst effect of depression like tendencies is unemployment. Can government budget be
helpful in fighting it?
27. Inflationary pressure harms the poor people most. Can government budget be helpful in
reducing it? Explain how.
28. Explain why the tax multiplier is smaller in absolute value than the government expenditure
multiplier.
Tax multiplier is smaller in absolute value compared to the government spending multiplier.
This is because an increase in government spending directly affects total spending, whereas
taxes enter the multiplier process through their impact on disposable income, which
influences household consumption (which is part of total spending).
29. Does public debt impose a burden? Explain.
Public debt is a burden if it reduces future growth in output. By borrowing government
transfers the burden of reduced consumption on future generations. This is because it
borrows by issuing bonds to the people living at present but may decide to pay off the bonds
some twenty years later by raising taxes. These may be levied on the young populations that
have just entered the workforce, whose disposable income will go down and hence
consumption. Public borrowing also reduces the amount of savings available to the private
sector. It reduces capital formation and growth, therefore, debt act as a ‘burden’ on future
generations.
30. Explain why public goods must be provided by the government.
Public goods and services are only produced by the government such as roads, park, water,
bridges, government administration, and national defense etc. Consumption of these goods
by the individuals does reduce their income as these are available at free of cost. These
goods are non – rival and non – excludable goods.
The benefit of these goods is available to all.