50 Important MCQs on Government Budget and the Economy

Here are 50 MCQs on Government Budget and the Economy to help you prepare for exams like RRB NTPC 2024 and all others.

Government Budget and the Economy MCQs

1. General Questions on Government Budget

What is the primary objective of a government budget?
- A) To promote economic growth
- B) To control inflation
- C) To estimate government revenue and expenditure
- D) To increase unemployment
- Answer: C) To estimate government revenue and expenditure
The Union Budget of India is presented by the Finance Minister in which month?
- A) January
- B) February
- C) March
- D) December
- Answer: B) February
Which of the following is not included in the Union Budget?
- A) Revenue receipts
- B) Expenditure estimates
- C) Public debt
- D) Tax exemptions
- Answer: D) Tax exemptions
The first Union Budget of India was presented in which year?
- A) 1947
- B) 1950
- C) 1952
- D) 1947
- Answer: D) 1947
Which of the following is the main focus of the government while preparing the budget?
- A) Economic stabilization
- B) Recession control
- C) Maximizing industrial output
- D) Balancing the demand-supply gap
- Answer: A) Economic stabilization

2. Types of Budget

What is a ‘surplus budget’?
- A) When the government’s total expenditure is more than its total revenue
- B) When the government’s total revenue exceeds its total expenditure
- C) When the government does not borrow any funds
- D) None of the above
- Answer: B) When the government’s total revenue exceeds its total expenditure
Which of the following budgets is considered ‘deficit budget’?
- A) When revenue is equal to expenditure
- B) When revenue exceeds expenditure
- C) When expenditure exceeds revenue
- D) None of the above
- Answer: C) When expenditure exceeds revenue
What is a ‘balanced budget’?
- A) When government revenue equals its expenditure
- B) When there is no revenue generation
- C) When expenditure is greater than revenue
- D) None of the above
- Answer: A) When government revenue equals its expenditure
What does a ‘deficit budget’ indicate?
- A) The government has sufficient revenue to meet its expenditure
- B) The government needs to borrow funds to finance its expenditure
- C) The government does not collect any revenue
- D) The government has no plans for taxation
- Answer: B) The government needs to borrow funds to finance its expenditure
Which type of budget is considered the most common in India?
- A) Surplus budget
- B) Balanced budget
- C) Deficit budget
- D) None of the above
- Answer: C) Deficit budget

3. Budget Components

Which of the following is not a component of the Union Budget?
- A) Receipts
- B) Expenditure
- C) Revenue Deficit
- D) Tax Policy
- Answer: D) Tax Policy
Which of the following is considered the major source of revenue for the Indian government?
- A) Borrowing from other countries
- B) Direct taxes
- C) Export earnings
- D) Sale of assets
- Answer: B) Direct taxes
What is meant by ‘fiscal deficit’?
- A) The difference between total government revenue and total expenditure
- B) The total expenditure of the government
- C) The total revenue collected by the government
- D) The excess of government’s expenditure over its revenue
- Answer: D) The excess of government’s expenditure over its revenue
What is meant by ‘revenue deficit’?
- A) When total revenue is more than total expenditure
- B) When the government borrows money to meet its revenue requirement
- C) When total expenditure exceeds total revenue
- D) When revenue is zero
- Answer: C) When total expenditure exceeds total revenue
What is the ‘capital budget’ concerned with?
- A) Expenditure on goods and services
- B) Borrowing and repayment of loans
- C) Day-to-day government operations
- D) None of the above
- Answer: B) Borrowing and repayment of loans

4. Fiscal Policy and Budgeting

Which of the following is an objective of fiscal policy?
- A) Control inflation
- B) Stimulate economic growth
- C) Reduce unemployment
- D) All of the above
- Answer: D) All of the above
Which is the primary tool used by the government to manage fiscal policy?
- A) Taxation
- B) Import-export policy
- C) Public borrowing
- D) Monetary policy
- Answer: A) Taxation
Which of the following is the main objective of the government’s fiscal policy?
- A) Maximizing profits of businesses
- B) Minimizing government spending
- C) Stabilizing the economy
- D) Increasing exports
- Answer: C) Stabilizing the economy
The fiscal policy of the government is aimed at:
- A) Promoting investment in the economy
- B) Ensuring that government expenditure meets social objectives
- C) Collecting taxes for infrastructure development
- D) All of the above
- Answer: D) All of the above
Which of the following is an indirect tax?
- A) Income tax
- B) Corporate tax
- C) Sales tax
- D) Wealth tax
- Answer: C) Sales tax

5. Taxes and the Budget

Which of the following is a direct tax?
- A) Goods and Services Tax (GST)
- B) Income tax
- C) Excise duty
- D) Sales tax
- Answer: B) Income tax
The Goods and Services Tax (GST) is which type of tax?
- A) Direct tax
- B) Indirect tax
- C) Progressive tax
- D) Regressive tax
- Answer: B) Indirect tax
Which of the following taxes is levied by the central government in India?
- A) Property tax
- B) Income tax
- C) Sales tax
- D) Land tax
- Answer: B) Income tax
Which of the following is a feature of the GST system in India?
- A) It is a dual tax system (Central and State)
- B) It is applicable only to goods
- C) It is applicable to luxury items only
- D) None of the above
- Answer: A) It is a dual tax system (Central and State)
Which of the following taxes is not part of the Indian taxation system?
- A) Corporate tax
- B) Income tax
- C) Land revenue tax
- D) Capital gains tax
- Answer: C) Land revenue tax

6. Economic Implications and Budget

What is the effect of a budget deficit on the economy?
- A) Reduces inflation
- B) Increases inflationary pressure
- C) Decreases government borrowing
- D) Reduces interest rates
- Answer: B) Increases inflationary pressure
What is the ‘Revenue Receipts’ in the context of the Indian government budget?
- A) Income generated from taxes
- B) Borrowed funds
- C) Profit from government-owned enterprises
- D) Income from the sale of assets
- Answer: A) Income generated from taxes
Which of the following can be considered a consequence of a fiscal deficit?
- A) Increase in inflation
- B) Increase in public debt
- C) Increase in the cost of borrowing
- D) All of the above
- Answer: D) All of the above
Which of the following is considered an ‘economic shock’ to the budget?
- A) A sudden increase in commodity prices
- B) A rise in income tax
- C) A reduction in government spending
- D) A rise in exports
- Answer: A) A sudden increase in commodity prices
The ‘Non-Tax Revenue’ in the Union Budget includes:
- A) Taxes on income
- B) Dividends from public sector enterprises
- C) Borrowed funds
- D) Export earnings
- Answer: B) Dividends from public sector enterprises

7. Budgetary Reforms

Which of the following is a major budgetary reform in India?
- A) Introduction of the GST
- B) Implementation of the Green Revolution
- C) Privatization of industries
- D) Demonetization
- Answer: A) Introduction of the GST
The government aims to achieve fiscal consolidation by:
- A) Reducing fiscal deficit
- B) Increasing public borrowing
- C) Increasing corporate taxes
- D) Reducing imports
- Answer: A) Reducing fiscal deficit
The Goods and Services Tax (GST) came into effect in India on:
- A) 1st January 2016
- B) 1st July 2017
- C) 1st April 2018
- D) 1st January 2015
- Answer: B) 1st July 2017
Which of the following is a feature of fiscal federalism in India’s budget system?
- A) Central government has more power than state governments
- B) States do not contribute to central taxes
- C) States have no say in government spending
- D) Both central and state governments share revenue resources
- Answer: D) Both central and state governments share revenue resources
The term ‘expenditure management’ refers to:
- A) Increasing government spending
- B) Reducing the size of the budget
- C) Efficient allocation and management of government funds
- D) Selling government assets to raise revenue
- Answer: C) Efficient allocation and management of government funds

8. Current Budget Trends

Which of the following is a major concern in India’s recent budget?
- A) Increasing government subsidies
- B) Controlling inflation
- C) Reducing public debt
- D) Increasing tax exemptions
- Answer: C) Reducing public debt
The term ‘disinvestment’ in the budget refers to:
- A) Selling government assets to raise funds
- B) Increasing public investments in companies
- C) Boosting the agricultural sector
- D) Increasing exports
- Answer: A) Selling government assets to raise funds
What is the purpose of the ‘Pradhan Mantri Jan Dhan Yojana’ introduced in the budget?
- A) To increase financial inclusion
- B) To boost public sector enterprises
- C) To promote industrial growth
- D) To provide scholarships to students
- Answer: A) To increase financial inclusion
The ‘Atmanirbhar Bharat’ initiative in the recent Union Budget aims at:
- A) Promoting self-reliance in India
- B) Reducing government spending
- C) Increasing foreign investment
- D) Boosting agricultural exports
- Answer: A) Promoting self-reliance in India
The term ‘tax buoyancy’ refers to:
- A) The ability of the tax system to increase revenue with economic growth
- B) The reduction in tax rates to stimulate the economy
- C) The elasticity of government spending
- D) The balance between tax rates and government revenue
- Answer: A) The ability of the tax system to increase revenue with economic growth

9. Long-Term Economic Impact

The budget deficit can result in:
- A) Increased public debt
- B) Lower interest rates
- C) Increased exports
- D) Reduced taxation
- Answer: A) Increased public debt
The fiscal deficit is considered a major indicator of:
- A) Economic prosperity
- B) Economic health
- C) Inflationary pressures
- D) None of the above
- Answer: B) Economic health
Fiscal consolidation aims to:
- A) Increase government revenue
- B) Improve government savings
- C) Control the fiscal deficit
- D) None of the above
- Answer: C) Control the fiscal deficit
What is the main purpose of public sector enterprises in the budget?
- A) To increase government expenditure
- B) To generate revenue through profits
- C) To reduce government debt
- D) To reduce inflation
- Answer: B) To generate revenue through profits
Which of the following is a primary source of government income in India?
- A) Borrowing from international organizations
- B) Taxes and duties
- C) Sale of assets
- D) Foreign investments
- Answer: B) Taxes and duties

Additional MCQs on Government Budget and the Economy

Which of the following is an example of a non-tax revenue for the government?

A) Income tax
B) Profits from public sector enterprises
C) Sales tax
D) Custom duties
Answer: B) Profits from public sector enterprises

The purpose of ‘Fiscal Deficit’ in the budget is to measure:

A) The difference between total expenditure and total revenue
B) The revenue from public services
C) Government borrowing requirement
D) The balance between income and expenditure
Answer: C) Government borrowing requirement

Which of the following is the main purpose of ‘Fiscal Responsibility and Budget Management (FRBM) Act’?

A) To control inflation
B) To ensure fiscal discipline by the government
C) To improve foreign investments
D) To encourage savings
Answer: B) To ensure fiscal discipline by the government

Which of the following is an example of ‘capital receipts’ in the budget?

A) Borrowings by the government
B) Taxes collected
C) Income from exports
D) Dividends from public sector units
Answer: A) Borrowings by the government

Which of the following is the primary source of the government’s non-tax revenue?

A) Loans and borrowings
B) Interest and dividend receipts
C) Income tax collections
D) Customs duties
Answer: B) Interest and dividend receipts

What is the main purpose of the ‘Public Debt’ in a government budget?

A) To finance deficit spending
B) To increase government savings
C) To reduce inflationary pressures
D) To balance taxes and expenditures
Answer: A) To finance deficit spending

Which of the following is a component of the ‘Capital Budget’ of the Indian government?

A) Borrowings from the Reserve Bank of India
B) Customs duties
C) Government spending on education
D) Revenue from taxation
Answer: A) Borrowings from the Reserve Bank of India

Which of the following can be a result of a fiscal deficit?

A) Higher government borrowing
B) Reduction in the public sector
C) Increased foreign investment
D) Lower inflation
Answer: A) Higher government borrowing

Which of the following represents the ‘Revenue Expenditure’ in the Union Budget?

A) Interest payments on government debt
B) Borrowings from international organizations
C) Capital investments in infrastructure
D) Sales of government assets
Answer: A) Interest payments on government debt

Which of the following is a direct effect of a ‘budget surplus’?

A) Increased public debt
B) Lower taxation
C) Increased savings and investments in the economy
D) Higher government borrowing
Answer: C) Increased savings and investments in the economy

In the context of the government budget, what does the term ‘deficit financing’ mean?

A) Borrowing funds from international markets
B) Raising taxes to meet the budgetary shortfall
C) Printing additional currency to cover the deficit
D) Reducing government spending
Answer: C) Printing additional currency to cover the deficit

Which of the following is a key feature of the ‘Pradhan Mantri Awas Yojana’ (PMAY) as mentioned in the budget?

A) Providing affordable housing for the urban poor
B) Providing loans to farmers for irrigation
C) Subsidy for electric vehicles
D) Providing free healthcare to the elderly
Answer: A) Providing affordable housing for the urban poor

Which of the following is considered as an objective of a ‘progressive tax system’?

A) Tax rate increases as income increases
B) Tax rate decreases as income increases
C) Flat tax rate for all income levels
D) No taxes on high-income groups
Answer: A) Tax rate increases as income increases

Which of the following taxes is considered the main source of revenue for state governments in India?

A) Income tax
B) Sales tax
C) Corporate tax
D) Excise duty
Answer: B) Sales tax

The Budget for which of the following sectors was a key focus in recent Union Budgets of India?

A) Agriculture
B) Healthcare
C) Digital infrastructure
D) All of the above
Answer: D) All of the above

These 50 MCQs on Government Budget and the Economy will help you get familiar with key concepts like fiscal policy, taxation, budget deficits, and economic planning. Happy studying!

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