MCQ
upsc-p1-economy-fiscal-policy-budget MCQ - Practice Questions with Answers
Solve 9 upsc-p1-economy-fiscal-policy-budget questions for RAS/RPSC preparation.
Practice questions
Q1The 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.
Q2With 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.
Statements 1 and 3 are correct. Revenue receipts do not create liabilities or reduce assets. Capital receipts either create liabilities or reduce assets; therefore loan recovery and disinvestment are capital receipts without creating new debt, making Statement 2 incorrect.
Q3Match 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.
Q4Consider 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?
Both statements are correct. Shifting financing to a public entity can keep the obligation outside the immediate headline Budget figure, but it does not erase the public-sector liability. This is why off-budget borrowing can weaken fiscal transparency.
Q5With reference to parliamentary control over public expenditure, consider the following statements: 1. Expenditure charged on the Consolidated Fund is neither discussed nor voted in Parliament. 2. Demands for Grants are voted in the Lok Sabha. 3. Withdrawal from the Consolidated Fund requires appropriation made by law. Which of the statements given above are correct? Select the correct answer using the code given below.
Statements 2 and 3 are correct. Charged expenditure is not voted, but it may be discussed and still requires appropriation from the Consolidated Fund. Thus, the absolute claim in Statement 1 is incorrect.
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6Match List I with List II and select the correct answer using the code given below. List I (Constitutional provision) (a) Article 112 (b) Article 113 (c) Article 114 (d) Article 116 List II (Budget function) 1. Vote on account, vote of credit and exceptional grants 2. Annual Financial Statement 3. Demands for Grants in the Lok Sabha 4. Appropriation authorising withdrawal from the Consolidated Fund
7With 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.
8Consider 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?
9With 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.