The Jan 27th Static Quiz on Economy (Government budgeting)
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The Jan 27th Static Quiz on Economy (Government budgeting)
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- Question 1 of 10
1. Question
Which of the folllowing are the role of government in Budgeting?
1. To Promote Economic, Efficiency and Growth
2. To Strengthen the Institution
3. For Fair Distribution of Income through Taxation
4. To provide a generous social security system and egalitarian societyCorrectAns;- d) All of the above
Explanation;-
About Objectives of Government Budget
1. Reallocation of Resources – It helps to distribute resources keeping in view the social and economic advantages of the country. The factors that influence the allocation of resources are.
2. Allowance or Tax concessions – The government gives allowance and tax concessions to manufacturers to encourage investment.
3. Direct production of goods and services – The government can take the production process directly if the private sector does not show any interest.
4. Minimise inequalities in income and wealth – In an economic system, income and wealth inequality is an integral part. So, the government aims to bring equality by imposing a tax on the elite class and spending extra on the well-being of the poor.
5. Economic Stability – The budget is also utilized to avoid business fluctuations to accomplish the aim of financial stability. Policies such as deficit budget during deflation and excess budget during inflation assist in balancing the prices in the economy.
6. Manage Public Enterprises – Many public sector industries are built for the social welfare of the people. The budget is planned to deliver different provisions for operating such business and imparting financial help.
7. Economic Growth – A country’s economic growth is based on the rate of investment and saving. Therefore, the budgetary plan focuses on preparing adequate resources for investing in the public sector and raise the overall rate of investments and savings.
8. Decrease regional differences – It aims to diminish regional inequalities by implementing taxation and expenditure policy and promoting the installation of production units in underdeveloped regions.
IncorrectAns;- d) All of the above
Explanation;-
About Objectives of Government Budget
1. Reallocation of Resources – It helps to distribute resources keeping in view the social and economic advantages of the country. The factors that influence the allocation of resources are.
2. Allowance or Tax concessions – The government gives allowance and tax concessions to manufacturers to encourage investment.
3. Direct production of goods and services – The government can take the production process directly if the private sector does not show any interest.
4. Minimise inequalities in income and wealth – In an economic system, income and wealth inequality is an integral part. So, the government aims to bring equality by imposing a tax on the elite class and spending extra on the well-being of the poor.
5. Economic Stability – The budget is also utilized to avoid business fluctuations to accomplish the aim of financial stability. Policies such as deficit budget during deflation and excess budget during inflation assist in balancing the prices in the economy.
6. Manage Public Enterprises – Many public sector industries are built for the social welfare of the people. The budget is planned to deliver different provisions for operating such business and imparting financial help.
7. Economic Growth – A country’s economic growth is based on the rate of investment and saving. Therefore, the budgetary plan focuses on preparing adequate resources for investing in the public sector and raise the overall rate of investments and savings.
8. Decrease regional differences – It aims to diminish regional inequalities by implementing taxation and expenditure policy and promoting the installation of production units in underdeveloped regions. - Question 2 of 10
2. Question
Which of the following are correctly matched regaridng different types of budget?
1. Balanced Budget = A government budget is assumed to be balanced if the expected expenditure is similar to anticipated receipts for a fiscal year.
2. Surplus Budget – A budget is said to be surplus when the expected revenues surpass the estimated expenditure for a particular business year. Here, the budget becomes surplus, when taxes imposed, are higher than the expense.
3. Deficit Budget- A budget is on deficit if the expenditure surpasses the revenue for a designated year.CorrectAns;- d) All of the above
Explanation;-
• All are correctly matched, self explanatory.
IncorrectAns;- d) All of the above
Explanation;-
• All are correctly matched, self explanatory.
- Question 3 of 10
3. Question
Which of the following are correctly matched related to component of Government Budget?
1. Revenue Budget = The revenue budget contains revenue expenditure and receipts.
2. Capital Budget = The capital budget includes the capital receipts (such as disinvestment, borrowing) and lengthy capital expenditure (for instance, long-term investments, creation of assets).CorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statements are correct.
About Components of Government Budget
• The budget is classified into two segments:-
• Revenue Budget – The revenue budget contains revenue expenditure and receipts. In this receipt, both tax revenue (such as excise duty, income tax) and non-tax revenue (like profits, interest receipts) are recorded.
• Capital Budget – The capital budget includes the capital receipts (such as disinvestment, borrowing) and lengthy capital expenditure (for instance, long-term investments, creation of assets). Capital receipts are government liabilities or decrease financial assets, such as the recovery of loans, market borrowing, etc.
Impact of the budget.
A budget influences society in three steps.
a. It improves the aggregate financial policy by controlling expenditure, given the number of revenues.
b. It allocates resources of a nation on a foundation of social priorities.
c. It comprises efficient and productive programmes to deliver goods and services goods and services and achieve targeted goals.IncorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statements are correct.
About Components of Government Budget
• The budget is classified into two segments:-
• Revenue Budget – The revenue budget contains revenue expenditure and receipts. In this receipt, both tax revenue (such as excise duty, income tax) and non-tax revenue (like profits, interest receipts) are recorded.
• Capital Budget – The capital budget includes the capital receipts (such as disinvestment, borrowing) and lengthy capital expenditure (for instance, long-term investments, creation of assets). Capital receipts are government liabilities or decrease financial assets, such as the recovery of loans, market borrowing, etc.
Impact of the budget.
A budget influences society in three steps.
a. It improves the aggregate financial policy by controlling expenditure, given the number of revenues.
b. It allocates resources of a nation on a foundation of social priorities.
c. It comprises efficient and productive programmes to deliver goods and services goods and services and achieve targeted goals. - Question 4 of 10
4. Question
Which of the folloiwng statements about Budget are correct?
1. the Constitution of India does not specifically use the word Budget
2. According to constitutional provisions, the Annual Financial Statement has to distinguish expenditure on revenue account from other expenditure.CorrectAns;- c) Both 1 and 2
Explanation;-
• The genesis of the central Budget in India goes back to 1860 when it was first introduced by then finance minister James Wilson, two years after the transfer of Indian administration from the East India Company to the British Crown. The Budget is presented through 14 documents, some of which are mandated by the Constitution of India, while others are in the nature of explanatory documents.
About Annual Financial Statement
• Interestingly, the Constitution of India does not specifically use the word Budget.
• Article 112 of the Constitution provides for laying before Parliament an ‘Annual Financial Statement’ providing a statement of the estimated receipts and expenditure for the financial year.
• This statement evidences the receipts and expenditure of government in three separate parts under which accounts are maintained. These are: (i) Consolidated Fund of India; (ii) Contingency Fund of India and, (iii) Public Account.
• According to constitutional provisions, the Annual Financial Statement has to distinguish expenditure on revenue account from other expenditure. It comprises:-
1. Revenue budget: Proceeds of taxes and interest and dividend on investments made by government, fees, and other receipts for services rendered by government.
2. Capital budget: Capital receipts and payments, including loans, raised by government from public, borrowings from Reserve Bank, et al.IncorrectAns;- c) Both 1 and 2
Explanation;-
• The genesis of the central Budget in India goes back to 1860 when it was first introduced by then finance minister James Wilson, two years after the transfer of Indian administration from the East India Company to the British Crown. The Budget is presented through 14 documents, some of which are mandated by the Constitution of India, while others are in the nature of explanatory documents.
About Annual Financial Statement
• Interestingly, the Constitution of India does not specifically use the word Budget.
• Article 112 of the Constitution provides for laying before Parliament an ‘Annual Financial Statement’ providing a statement of the estimated receipts and expenditure for the financial year.
• This statement evidences the receipts and expenditure of government in three separate parts under which accounts are maintained. These are: (i) Consolidated Fund of India; (ii) Contingency Fund of India and, (iii) Public Account.
• According to constitutional provisions, the Annual Financial Statement has to distinguish expenditure on revenue account from other expenditure. It comprises:-
1. Revenue budget: Proceeds of taxes and interest and dividend on investments made by government, fees, and other receipts for services rendered by government.
2. Capital budget: Capital receipts and payments, including loans, raised by government from public, borrowings from Reserve Bank, et al. - Question 5 of 10
5. Question
Which of the following statements about Appropriation Bill are correct?
1. Appropriation Bill is not a money bill but still it allows the government to withdraw funds from the Consolidated Fund of India
2. As per article 114 of the Constitution, the government can withdraw money from the Consolidated Fund only after receiving approval from President.CorrectAns;- d) None of the above
Explanation;-
• Both the statements are incorrect.
About Appropriation Bill
• Appropriation Bill is a money bill that allows the government to withdraw funds from the Consolidated Fund of India to meet its expenses during the course of a financial year.
• As per article 114 of the Constitution, the government can withdraw money from the Consolidated Fund only after receiving approval from Parliament.
• To put it simply, the Finance Bill contains provisions on financing the expenditure of the government, and Appropriation Bill specifies the quantum and purpose for withdrawing money.About Procedure followed
• The government introduces the Appropriation Bill in the lower house of Parliament after discussions on Budget proposals and Voting on Demand for Grants.
• The Appropriation Bill is first passed by the Lok Sabha and then sent to the Rajya Sabha.
• The Rajya Sabha has the power to recommend any amendments in this Bill. However, it is the prerogative of the Lok Sabha to either accept or reject the recommendations made by the upper house of Parliament.
• The unique feature of the Appropriation Bill is its automatic repeal clause, whereby the Act gets repealed by itself after it meets its statutory purpose.What happens when the bill is defeated?
• Since India subscribes to the Westminster system of parliamentary democracy, the defeat of an Appropriation Bill (and also the Finance Bill) in a parliamentary vote would necessitate resignation of a government or a general election. This has never happened in India till date, though.IncorrectAns;- d) None of the above
Explanation;-
• Both the statements are incorrect.
About Appropriation Bill
• Appropriation Bill is a money bill that allows the government to withdraw funds from the Consolidated Fund of India to meet its expenses during the course of a financial year.
• As per article 114 of the Constitution, the government can withdraw money from the Consolidated Fund only after receiving approval from Parliament.
• To put it simply, the Finance Bill contains provisions on financing the expenditure of the government, and Appropriation Bill specifies the quantum and purpose for withdrawing money.About Procedure followed
• The government introduces the Appropriation Bill in the lower house of Parliament after discussions on Budget proposals and Voting on Demand for Grants.
• The Appropriation Bill is first passed by the Lok Sabha and then sent to the Rajya Sabha.
• The Rajya Sabha has the power to recommend any amendments in this Bill. However, it is the prerogative of the Lok Sabha to either accept or reject the recommendations made by the upper house of Parliament.
• The unique feature of the Appropriation Bill is its automatic repeal clause, whereby the Act gets repealed by itself after it meets its statutory purpose.What happens when the bill is defeated?
• Since India subscribes to the Westminster system of parliamentary democracy, the defeat of an Appropriation Bill (and also the Finance Bill) in a parliamentary vote would necessitate resignation of a government or a general election. This has never happened in India till date, though. - Question 6 of 10
6. Question
Which of the following statement about Fiscal Responsibility and Budget Management (FRBM) Act, 2003?
1. The FRBM is an act of the parliament that set targets for the Government of India to establish financial discipline, improve the management of public funds, strengthen fiscal prudence and reduce its fiscal deficits.
2. It was first introduced in the parliament of India in the year 2000 by Vajpayee Government for providing legal backing to the fiscal discipline to be institutionalized in the country.
3. As a result, the FRBM Act of 2003 had mandated that, apart from limiting the fiscal deficit to 0% of the nominal GDP, the revenue deficit should be brought down to 3%.CorrectAns;- a) Only 1 and 2
Explanation;-
• The 3rd statements percentage is reversed that’s y it is incorrect.About FRBM Act 2003
• The FRBM is an act of the parliament that set targets for the Government of India to establish financial discipline, improve the management of public funds, strengthen fiscal prudence and reduce its fiscal deficits.
• It was first introduced in the parliament of India in the year 2000 by Vajpayee Government for providing legal backing to the fiscal discipline to be institutionalized in the country.
• Subsequently, the FRBM Act was passed in the year 2003.
• As a broad rule, it is considered fiscally imprudent for a government to borrow money for “revenue” purposes.
• As a result, the FRBM Act of 2003 had mandated that, apart from limiting the fiscal deficit to 3% of the nominal GDP, the revenue deficit should be brought down to 0%.
• This would have meant that all the government borrowing (or fiscal deficit) for the year would have funded only capital expenditure by the government.IncorrectAns;- a) Only 1 and 2
Explanation;-
• The 3rd statements percentage is reversed that’s y it is incorrect.About FRBM Act 2003
• The FRBM is an act of the parliament that set targets for the Government of India to establish financial discipline, improve the management of public funds, strengthen fiscal prudence and reduce its fiscal deficits.
• It was first introduced in the parliament of India in the year 2000 by Vajpayee Government for providing legal backing to the fiscal discipline to be institutionalized in the country.
• Subsequently, the FRBM Act was passed in the year 2003.
• As a broad rule, it is considered fiscally imprudent for a government to borrow money for “revenue” purposes.
• As a result, the FRBM Act of 2003 had mandated that, apart from limiting the fiscal deficit to 3% of the nominal GDP, the revenue deficit should be brought down to 0%.
• This would have meant that all the government borrowing (or fiscal deficit) for the year would have funded only capital expenditure by the government. - Question 7 of 10
7. Question
Which of the following statements about Interim Budget are correct?
1. Interim Budget deals with both receipts and expenditure.
2. Interim Budget is passed after discussion in Lok Sabha.CorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Interim Budget
• When the elections are approaching it is impractical to present a full budget, so the government presents an interim budget, which is like a budget for the transition period (few months remaining in power).
• Interim Budget deals with both receipts and expenditure.
• Interim Budget is passed after discussion in Lok Sabha.
• The Constitution gives the government the power to make changes in the tax regime in the interim budget.IncorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Interim Budget
• When the elections are approaching it is impractical to present a full budget, so the government presents an interim budget, which is like a budget for the transition period (few months remaining in power).
• Interim Budget deals with both receipts and expenditure.
• Interim Budget is passed after discussion in Lok Sabha.
• The Constitution gives the government the power to make changes in the tax regime in the interim budget. - Question 8 of 10
8. Question
Which of the following statements about Vote on account are correct?
1. A vote-on-account contains only the expenditure of the government
2. A Vote-On-Account is treated as a formal matter and passed by the Lok Sabha without discussionCorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Vote on Account
• The vote-on-account is passed through the interim budget. Vote-on-Account is a special provision by which the government obtains Parliament’s approval for funds sufficient to incur expenditure for a part of the year (till the formation of a new government)
• A vote-on-account contains only the expenditure of the government
• A Vote-On-Account is treated as a formal matter and passed by the Lok Sabha without discussion
• Any alteration in direct taxes can only be done through passing the Finance Bill. Hence it is important to note that Vote on Account cannot change the Direct Taxes.
• Votes on account, votes of credit and exceptional grants are specified in Article 116 of the constitution.IncorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Vote on Account
• The vote-on-account is passed through the interim budget. Vote-on-Account is a special provision by which the government obtains Parliament’s approval for funds sufficient to incur expenditure for a part of the year (till the formation of a new government)
• A vote-on-account contains only the expenditure of the government
• A Vote-On-Account is treated as a formal matter and passed by the Lok Sabha without discussion
• Any alteration in direct taxes can only be done through passing the Finance Bill. Hence it is important to note that Vote on Account cannot change the Direct Taxes.
• Votes on account, votes of credit and exceptional grants are specified in Article 116 of the constitution. - Question 9 of 10
9. Question
Which of the following statements about Token Grant are correct?
1. It is granted when funds to meet the proposed expenditure on a new service can be made available by reappropriation.
2. A demand for the grant of a token sum (of Re 1) is submitted to the vote of the Lok Sabha and if assented, funds are made available.CorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Token Grant
• It is granted when funds to meet the proposed expenditure on a new service can be made available by reappropriation. A demand for the grant of a token sum (of Re 1) is submitted to the vote of the Lok Sabha and if assented, funds are made available.
• Reappropriation involves transfer of funds from one head to another. It does not involve any additional expenditure.IncorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Token Grant
• It is granted when funds to meet the proposed expenditure on a new service can be made available by reappropriation. A demand for the grant of a token sum (of Re 1) is submitted to the vote of the Lok Sabha and if assented, funds are made available.
• Reappropriation involves transfer of funds from one head to another. It does not involve any additional expenditure. - Question 10 of 10
10. Question
Which of the following statements about Excess Grant are correct?
1. It is granted when money has been spent on any service during a financial year in excess of the amount granted for that service in the budget for that year.
2. It is voted by the Lok Sabha after the financial year.CorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Excess Grant
• It is granted when money has been spent on any service during a financial year in excess of the amount granted for that service in the budget for that year. It is voted by the Lok Sabha after the financial year.
• Before the demands for excess grants are submitted to the Lok Sabha for voting, they must be approved by the Public Accounts Committee of Parliament.
• The demand for excess grant is provided for under Article 115 of the Indian Constitution.
• This demand for extra money or excess grants is made when the expenditure has been incurred after a financial year has expired.IncorrectAns;- c) Both 1 and 2
Explanation;-
• Both the statemensta are correct.About Excess Grant
• It is granted when money has been spent on any service during a financial year in excess of the amount granted for that service in the budget for that year. It is voted by the Lok Sabha after the financial year.
• Before the demands for excess grants are submitted to the Lok Sabha for voting, they must be approved by the Public Accounts Committee of Parliament.
• The demand for excess grant is provided for under Article 115 of the Indian Constitution.
• This demand for extra money or excess grants is made when the expenditure has been incurred after a financial year has expired.
