Students of class 12 Economics should refer to MCQ Questions Class 12 Economics Government Budget and Economy with answers provided here which is an important chapter in Class 12 Economics NCERT textbook. These MCQ for Class 12 Economics with Answers have been prepared based on the latest CBSE and NCERT syllabus and examination guidelines for Class 12 Economics. The following MCQs can help you to practice and get better marks in the upcoming class 12 Economics examination

Chapter 11 Government Budget and Economy MCQ with Answers Class 12 Economics

MCQ Questions Class 12 Economics Government Budget and Economy provided below have been prepared by expert teachers of grade 12. These objective questions with solutions are expected to come in the upcoming Standard 12 examinations. Learn the below provided MCQ questions to get better marks in examinations.

Question.Capital receipt is that receipt of the government which:
(a) creates a liability
(b) reduces the assets
(c) both (a) and (b)
(d) neither la) nor (b)

Question. The difference between fiscal deficit and interest payment is called:
(a) revenue deficit
(b) primary deficit
(c) budget deficit
(d) capital deficit

Question. Which of the following are the objectives of government budget?
(a) Redistribution of income wealth
(b) Economic stability
(c) GDP growth
(d) all of these

Question. Which of the following is a non-tax receipt?
(a) Gift tax
(b) sales tax
(c) donations
(d) Excise duty

Question. A tax, the burden of which can be shifted to others, is called:
(a) Indirect tax
(b) direct tax
(c) wealth tax
(d) none of these

Question. In the context of government budget, which of the following statements is correct?
(a) Budget is a statement of expected annual receipts and expenditures of the government
(b) It is the detail of actual receipts and expenditures of the government in a financial year
(c) It offers a detailed description of achievements of the government during the five year plans
(d) It indicates BoP status of the domestic economy

Question. Which of the following is a part of the revenue expenditure in the Indian Government budget
(a) Interest payments
(b) Defence purchases all of these
(c) Wage bill of the government
(d) all of these

Question.Tax, the impact of which lies on the person on whom it is legally imposed, is known as:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) none of these

Question. Which of the following is an indirect tax?
(a) Wealth tax
(b) Excise tax
(c) income tax
(d) none of these

Question. Which of the following is a direct tax?
(a) income tax
(b)Excise tax
(c) sales tax
(d) custom duty

Question. Progressive tax is a tax which is :
(a) Charged at a decreasing rate when income of the individual increases
(b) Charged at a increasing rate when income of the individual increases
(c) A fixed percentage of an individual income
(d) None of these

Question. Deficit budget refers to that situation in which government’s budget expenditure is:
(a) less than its budget receipts
(b) more than its budget receipts
(c) equal to its budget receipts
(d) none of these

Question. Fiscal Deficit=
(a) Total expenditure – Total receipts other than borrowing
(b) Revenue expenditure – Revenue receipts
(c) Capital expenditure Capital receipts
d) Revenue expenditure + Capital expenditure – Revenue receipts

Question. A budget is a balanced one when:
(a) Total expenditure = Total receipts
(b) Total expenditure< Total receipts
(c) Total expenditure > Total receipts
(d) none of these

Question. Which of the following is a non-tax receipt?
(a) Fees
(b) Fines
(c) gift tax
(d) grants and donations

Question. If primary deficit is ₹ 6,900 and interest payment is ₹600, then fiscal deficit is:
(a) ₹ 6,300
(b) ₹7,500
(c) ₹27.400
(d) ₹7.300

Question, Which of the following are capital receipts of the government?
(a) Recovery of loans
(b) Borrowings
(c) Disinvestment
(d) All of these

Question. Capital expenditure is that estimated expenditure of the government by which:
(a) assets are increased
(b) liability is decreased
(c) both (a) and (b)
(d) assets and liabilities do not change

Question. In which of the following ways, can deficit in budget be financed?
(a) Borrowing from RBI
(b) Borrowing from the public
(c) both (a) and (b)
(d) Neither (a) nor (b)

Question. Which of the following is/are implication/s of fiscal deficit?
(a) Erosion of government credibility
(b) Inflationary spiral
(c) national debts for future generation
(d) none of these

Question. Surplus budget is that budget wherein:
(a) Estimated revenue of the government <Estimated expenditure of the government
(b) Estimated revenue of the government > Estimated expenditure of the government
(c) Estimated revenue of the government= Estimated expenditure of the government
(d) none of these

Question. Regressive tax is a tax which is :
(a)Charged at a increasing rate when income of the individual increases
(b)Charged at a decreasing rate when income of the individual increases
(c)Relatively a low percentage of an individual’s income
(d)None of these

Question. Tax is imposed on value added at the various stages of production is known as:
(a) Corporate profit tax
(b) direct personal tax
(c) value added tax
(d) none of these

Question. Taxes like wealth and gift tax in India which carry their significance in terms of revenue yield are called:
(a) Indirect tax
(b) direct tax
(c) value added tax
(d) paper taxes

Question. Borrowings is a capital receipt because.
(a) It creates a liability
(b) It creates an asset
(c) It reduces a liability
(d) All of the above

Question. Union Budget is the budget of :
(a) Local Government
(b) Central Government 
(c) State Government
(d) Election Commission

Question. Which one of the following is a pair of direct tax?
(a) Excise duty and Wealth tax
(b) Service tax and Income tax
(c) Excise duty and Service tax
(d) Wealth tax and Income tax

Question. ______ deficit indicates that the government will have to borrow not only to finance its investments but also its consumption expenditure.
(a) Revenue
(b) Fiscal
(c) Primary
(d) None of these

Question. Providing Covid – 19 vaccines to the neighboring countries will ______ the financial burden of the government.
(a) decrease 
(b) Increase
(c) no change
(d) marginally decrease

Question. Identify the tax whose burden can be shifted?
(a) GST
(b) Sales tax
(c) VAT
(d) All of the above

Question. Which of the following affects national income?
(a) Goods and Services tax
(b) Corporation tax
(c) Subsidies
(d) None of these

Question. “Policies of surplus budget during inflation’ is a part of which objective of government budget?
(a) Economic growth
(b) Economic Stability
(c) Reducing Regional Disparities
(d) Reallocation of Resources

Question. Which of the following is not a non-tax revenue receipt?
(a) Goods and Service tax
(b) External Grants
(c) Dividends and Profits
(d) Disinvestment

Question. Loans to State Government and Union Territory Governments are a part of _ .
(a) Revenue receipts
(b) Capital receipts
(c) Capital expenditure
(d) Plan revenue expenditure

Question. From the following, which is not an implication of fiscal deficit?
(a) It determine total borrowing requirements to the government
(b) It increases the liability of the government
(c) It increase foreign dependence
(d) Repayment of the loan together with interest further decreases the fiscal deficit

Question. A tax, the burden of which can be shifted on to others, is called:
(a) indirect tax
(b) direct tax
(c) wealth tax
(d) None of these

Question. Fiscal Deficit – Interest Payments = ______ .
(a) Revenue Deficit
(b) Budget Deficit
(c) Primary Deficit
(d) None of these

Question. The primary deficit in a government budget is
(a) revenue expendiutre – revenue receipts
(b) total expenditure – total receipts
(c) revenue defict – interest payments
(d) fiscal deficit – interest payments

Question. An annual statement of the estimated receipts and expenditure of the government over the fiscal year is known as
(a) Budget
(b) Income estimates
(c) Account
(d) Expenditure

Question. The amount collected by the government as taxes and duties is known as _______
(a) Capital receipts
(b) Non-tax revenue receipts 
(c) Tax revenue receipts
(d) All of these

Question. When government spends more than it collects by way of revenue, it incurs ______
(a) Budget surplus
(b) Budget deficit
(c) Capital expenditure
(d) Revenue expenditure

Question. Financial Year in India is:
(a) April I to March 31
(b) January 1 to December 31
(c) October 1 to September 30
(d) None of the above

Question. Fiscal deficit equals:-
(a) Primary deficit minus interest payments
(b) Primary deficit plus interest payments
(c) Total budget expenditure minus total budget receipts
(d) None of the above.

Question. If government borrowings = ? 800 crore and interest payments = ? 155 crores, then find fiscal deficit and primary deficit.
(a) Fiscal deficit = ? 155 crore and Primary deficit = ? 800 crore
(b) Fiscal Deficit = ? 800 crore and Primary deficit = ? 155 crore
(c) Fiscal deficit = ? 155 crore and Primary Deficit = ? 645 crore
(d) Fiscal Deficit = ? 800 crore and Primary Deficit = ? 645 crore

Question. Which is included in the Direct Tax?
(a) Income Tax
(b) Gift Tax
(c) Both (a) and (b)
(d) Excise Duty

Question. Who issues 1 rupee note in India:
(a) Reserve Bank of India
(b) Finance Ministry of India
(c) State Bank of India
(d) None of these

Question. Assertion (a): Public goods are non-rivalrous.
Reason (R): The benefits of such goods can be enjoyed by all and are not restricted to any one person
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): Primary deficit = Fiscal deficit – Net interest liabilities
Reason (R): Net interest liabilities consist of interest payments minus interest receipts by the government on net domestic lending.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): A custom duty on cotton raised from 0 percent to 10 percent in the Budget 2021.
Reason (R): Custom Duty is not subsumed in GST.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

Question. Assertion (a): The government budget can be used as an effective tool in the process of employment generation.
Reason (R): Investment in infrastructural projects like construction of flyover, bridges, expansion of roads, etc. Creates jobs for different sections of the workforce. In rural/urban areas government can provide jobs through various employment generation schemes like MGNREGA, SJSRY, PMRY, etc.
Alternatives:
(a) Both Assertion (a) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (a).
(b) Both Assertion (a) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (a).
(c) Assertion (a) is true but Reason (R) is False
(d) Assertion (a) is False but Reason (R) is true.

We hope the above multiple choice questions for Class 12 Economics for Chapter 11 Government Budget and Economy provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Government Budget and Economy is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 students. Please go through these and let us know if you have any feedback in the comments section.