MCQ
upsc-p1-economy-fiscal-policy-budget MCQ - Practice Questions with Answers
Solve 7 upsc-p1-economy-fiscal-policy-budget questions for RAS/RPSC preparation.
Practice questions
Q1Match List I with List II and select the correct answer using the code given below. List I (Indicator) (a) Fiscal deficit (b) Revenue deficit (c) Primary deficit (d) Effective revenue deficit List II (Measure) 1. Revenue expenditure minus revenue receipts 2. Fiscal deficit minus interest payments 3. Revenue deficit minus grants for creation of capital assets 4. Total expenditure minus total receipts excluding borrowings
Fiscal deficit measures total expenditure minus receipts excluding borrowings; revenue deficit compares revenue expenditure with revenue receipts; primary deficit removes interest payments from fiscal deficit; and effective revenue deficit removes capital-asset grants from revenue deficit. Therefore option A gives the complete match.
Q2With reference to fiscal consolidation, consider the following statements: 1. A lower fiscal deficit necessarily proves that expenditure quality has improved. 2. Cutting capital expenditure can damage long-term growth. 3. Higher tax buoyancy can ease consolidation without harsh expenditure cuts. Which of the statements given above are correct? Select the correct answer using the code given below.
Statements 2 and 3 are correct. A deficit can be reduced by compressing asset-creating expenditure, so a lower figure alone does not prove better expenditure quality. Protecting capital expenditure and improving tax buoyancy can make consolidation more durable.
Q3Consider the following statements regarding the Fiscal Responsibility and Budget Management Act, 2003: 1. It provides a medium-term framework for fiscal discipline and transparency for the Union government. 2. It guarantees that the fiscal deficit can never deviate from its numerical target. Which one of the following is correct?
Statement 1 is correct. The Act creates fiscal targets, medium-term statements and transparency duties. Statement 2 is incorrect because the framework permits bounded deviations on specified grounds through an escape clause; it does not make every deviation impossible.
Q4The fact that some grants shown as revenue expenditure may create assets outside the Union government's books is incorporated into deficit measurement through the following sequence: (a) Deduct grants for creation of capital assets from revenue deficit (b) Compute revenue deficit as revenue expenditure minus revenue receipts (c) Obtain effective revenue deficit (d) Classify the grant as revenue expenditure in the Union accounts Arrange the steps in the correct sequence and select the correct answer using the code given below.
The grant is first recorded as revenue expenditure in the Union accounts. Revenue deficit is then computed from revenue expenditure and revenue receipts. Grants for creation of capital assets are deducted from that revenue deficit to obtain effective revenue deficit. Hence option D is correct.
Q5With reference to deficit indicators, consider the following statements: 1. Fiscal deficit measures the government's net borrowing requirement. 2. Primary deficit excludes interest payments from fiscal deficit. 3. Effective revenue deficit deducts grants for creation of capital assets from revenue deficit. Which of the statements given above are correct? Select the correct answer using the code given below.
All three statements follow the definitions. Fiscal deficit is total expenditure minus total receipts excluding borrowings; primary deficit is fiscal deficit minus interest payments; and effective revenue deficit is revenue deficit minus grants for creation of capital assets.
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6With reference to receipts in the Union Budget, consider the following statements: 1. Revenue receipts neither create a liability nor reduce a government asset. 2. Every capital receipt creates a liability for the government. 3. Disinvestment proceeds are non-debt capital receipts. Which of the statements given above are correct? Select the correct answer using the code given below.
7Consider the following statements regarding off-budget borrowing: 1. Borrowing by a public entity for a government obligation may not immediately appear in the headline fiscal deficit. 2. Such borrowing can still leave an economic liability within the public sector. Which one of the following is correct?