Please refer to Chapter 11 Government Budget and Economy MCQ Class 12 Economics with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Economics. Students should refer to MCQ Questions for Class 12 Economics with Answers to score more marks in Grade 12 Economics exams. Students should read the chapter Government Budget and Economy and then attempt the following objective questions.

MCQ Questions Class 12 Economics Chapter 11 Government Budget and Economy

Government Budget and Economy MCQ Class 12 Economics provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Question. Which of the following sources of receipts in the government budget increases its liabilities?
(a) Direct taxes
(b) Recovery of loans
(c) Borrowings
(d) Dividend from PSUs

Question. Primary deficit is borrowing requirement of government for making:
(a) Interest Payments
(b) Other than interest payments
(c) All types of Payments
(d) Some specific payments

Question. How many types of revenue receipts are there?
(a) 2
(b) 3
(c) 4
(d) 6

Question. Which of the following statement is true?
(a) Loan from IMF is a revenue receipt.
(b) Higher revenue deficit necessarily leads to higher fiscal deficit.
(c) Borrowings by the government represent a situation of fiscal deficit.
(d) Revenue deficit is the excess of capital received over the revenue receipts.

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. Which of the following budget is more suitable for developing economies like India?
(a) Deficit budget
(b) Balanced Budget
(c) Surplus Budget
(d) None of these

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. Which is included in Indirect Tax?
(a) Excise Duty
(b) Sales Tax
(c) Both (a) and (b)
(d) Wealth Tax

Question. Budget may include :
(a) Revenue Deficit
(b) Fiscal Deficit
(c) Primary Deficit
(d) All of these

Question. Which of the following is a source of capital receipt?
(a) Foreign donations
(b) Dividends
(c) Dis-investment
(d) Indirect taxes

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. If the fiscal deficit is ₹ 550 crore and interest payment is ₹ 200 crore, then primary deficit.
(a) ₹ 200 crore
(b) ₹ 550 crore
(c) ₹ 765 crore
(d) ₹ 350 crore

Question. Which of the following is an example of direct tax?
(a) VAT
(b) Excise duty
(c) Entertainment tax
(d) Wealth tax

Question. Which is a component of Budget?
(a) Budget Receipts
(b) Budget Expenditure
(c) Both (a) and (b)
(d) None of the above

Question. Which one of the following is a combination of direct taxes:-
(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. Which of the following sources of receipts in the government budget increases its liabilities?
(a) Direct taxes
(b) Recovery of loans
(c) Borrowings
(d) Dividend from PSUs

Question. How many types of revenue receipts are there?
(a) 2
(b) 3
(c) 4
(d) 6

Question. Which type of expenditure is made in bridge construction ?
(a) Capital Expenditure
(b) Revenue Expenditure
(c) Both (a) and (b)
(d) None of the above

Question. Spot the Capital Receipt:
(a) Tax Received
(b) External grants received
(c) Dividend received
(d) Disinvestment

Question. Revenue Expenditure
(a) Create assets for the government
(b) Creates assets for the private sector
(c) Do not create assets for the government
(d) Create liability for the private sector

Question. Borrowing in government budget is:-
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary Deficit
(d) Deficit in taxes

Question. Which one of the following statements is incorrect?
(a) Revenue receipts are regular in nature
(b) There is no future obligation to return the amount in case of revenue receipts
(c) Capital receipts either create an asset or cause a reduction in the liabilities of the government.
(d) Borrowings are treated as a capital receipt as they lead to a decrease in liability.

Question. Repayment of Loans is an example of:
(a) Capital Expenditure
(b) Non-plan expenditure
(c) Revenue Expenditure
(d) Plan Expenditure

Question. DirWhich of the following is a capital receipt in the government Budget?
(a) Income tax
(b) Interest receipt
(c) Sale of shares of a public sector undertaking (PSU) to X Limited (Private company)
(d) Dividends from a Public Sector Undertaking (PSU)

Question. ect tax is called direct because it is collected directly from:-
(a) The producers on goods produced
(b) The seller on goods sold
(c) The buyers of goods
(d) The income earners

Question. The fiscal deficit will have to be financed through _______.
(a) Primary deficit
(b) Revenue deficit
(c) Borrowings
(d) Taxes

Question. A large share of ________ in fiscal deficit indicates that a large part of borrowing is being used to meet the government’s consumption expenditure needs rather than investment.
(a) Revenue deficit
(b) Primary deficit
(c) Budgetary deficit
(d) Borrowings

Question. a government budget, revenue deficit is ?50,000 crores and borrowings are ? 75,000 crores. The fiscal deficit will be:
(a) ?25,000 crore
(b) ?75,000 crore
(c) ?1,25,000 crore
(d) ?50,000 crore

Question. “Increasing the Rate of Income Tax” is a part of which objective of government budget?
(a) Reallocation of Resources
(b) Economic Stability
(c) Reducing Regional Disparities
(d) Reducing Inequalities in Income and Wealth

Question. Which of the following is capital expenditures
(a) Subsidies
(b) Purchase of shares
(c) Interest Payments 
(d) Defence purchases

Question. The duration of Government budget is :
(a) 5 years
(b) 2 years
(c) 1 year
(d) 10 years.

Question. Capital budget consist of:
(a) Revenue Receipts and Revenue Expenditure
(b) Capital Receipts and Capital Expenditure
(c) Direct and Indirect Tax
(d) None of these

Question. Another Implication of Fiscal deficit is
(a) it does not affect financial burden for future generation.
(b) it decreases financial burden for future generation
(c) it increases financial burden for future generation
(d) it maintains financial burden for future generation

Question. Which of the following is the component of a budget?
(a) Fiscal budget
(b) Capital budget
(c) Both of these
(d) None of these

Question. Steps taken through the government budget can influence:-
(a) Inequalities
(b) Allocation of resources
(c) Inflation
(d) All the above

Question. Which of the following statements is true?
(a) Expenditure on Ujjwala Yojana launched by the government is an example of capital expenditure
(b) Expenditure on Ujjwala Yojana launched by the government is an example of Revenue Expenditure
(c) Expenditure on Ujjwala Yojana launched by the Government is an example of Deferred Revenue Expenditure
(d) None of the Statements are correct

Question. Tax revenue of the Government includes :
(a) Income Tax
(b) Corporate Tax
(c) Excise Duty
(d) All of these

Question. Which of the following does not form the part of capital receipts of the Union Government?
(a) Non-Tax Revenue
(b) Loan recoveries
(c) Net Market borrowings
(d) None of the above

Question. Direct tax is called direct because it is collected from the
(a) the producers on goods produced
(b) the sellers on goods sold
(c) the buyers of goods
(d) the income earners

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. Primary deficit is the difference between
(a) fiscal deficit and revenue deficit
(b) revenue deficit and interest payments
(c) total expenditure and total revenue receipts
(d) fiscal deficit and interest payments

Question. The non-tax revenue in the following is:
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise

Question. Direct tax is a tax whose
(a) The liability to pay lies on one and incidence lies on the other person
(b) The liability to pay and incidence do not lie on the same person
(c) The liability to pay and incidence do lie on the government
(d) The liability to pay and incidence do lie on the same person

Question. The expenditures which do not create assets for the government is called :
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Both (a) and (b)
(d) None of the above

Question. What is the annual statement of the government’s fiscal revenue and fiscal expenditure known?
(a) Budget
(b) Fiscal Budget
(c) Capital Budget
(d) All of these

Question. Which of the following is a non-tax revenue?
(a) export duty
(b) import duty
(c) dividends
(d) excise duty

Question. Which of the following is the correct measure of primary deficit:-
(a) Fiscal deficit minus revenue deficit
(b) Revenue deficit minus interest payments
(c) Fiscal deficit minus interest payments
(d) Capital expenditure minus revenue expenditure

Question. What is the period of a fiscal year?
(a) 1 April to 31 March
(b) 1 January to 31 December
(c) 1 March to 28 February
(d) None of these

Question. The amount collected by the government in the form of interest, fees, and dividends is known as ________
(a) Tax-revenue receipts
(b) Capital receipts
(c) Non-tax revenue receipts
(d) None 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

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