XII Economics 2024-25 Mega Series Test # 7

Test # 07 | Chapter - 9
Macro Economics
Topic: Chapter 9
Time: 1.15 hrs. Max. Marks: 40

1. The stabilization function of the government budget mainly include- [1]

(a) Allocation of resources (b) Intervention to expand or reduce the demand
(c) Production of public goods (d) Distribution of income in society in a fair way

2. Match the Column A with Column B: [1]

Column A Column B
1. Non tax revenue (i) Borrowings
2. Fiscal deficit (ii) Allocation of resources

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3. Direct tax (iii) Escheat

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4. Objective of budget (iv) Property tax

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(a) 1-iii, 2-ii, 3-iv, 4-i (b) 1-i, 2-iv, 3-iii, 4-ii (c) 1-ii, 2-iv, 3-i, 4-iii (d) 1-iii, 2-i, 3-iv, 4-ii

3. A tax whose burden cannot be shifted to others is imposed generally on (Choose the correct alternative to

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fill up the blank) [1]
(a) producer of goods (b) seller of goods bl
(c) buyer of goods (d) income earners

4. The government sold 51% of the stake in a public sector unit to a private entity at a price of Rs 50 crore.
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For the remaining 49% of the stake, the government received a dividend of Rs. 1 crore. What is the
impact on revenue collection by the government? [1]
(a) Revenue receipt increased by Rs.51 crore.
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(b) Revenue receipt increased by Rs.1 crore and Capital receipt increased by Rs.50 crores.
(c) Capital receipts increased by Rs.51 crores.
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(d) Capital receipt increased by Rs.1 crore and Revenue receipt increased by Rs.1 crores.

5. What will be the value of fiscal deficit if primary deficit is Rs.53,000 crores and interest ON borrowings
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is Rs.5,000 crores? [1]

(a) Rs.58,000 crores (b) Rs.48,000 crores (c) Rs.68,000 crores (d) Rs.78,000 crores
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6. Which of the following statements is true about the primary deficit in a government’s budget? [1]
(a)The primary deficit is zero when the revenue deficit is zero
(b)The primary deficit is zero when the net interest payments are zero
(c)The primary deficit is zero when the fiscal deficit is zero
(d)The primary deficit is zero when the fiscal deficit is equal to the interest payment

7. Statement 1 : Government expenditure on Mid-Day Meal scheme running in government (state run)
schools is a type of Revenue expenditure in government budget. [1]
Statement 2: Receipts of the government from sale of shares of a Public Sector Undertaking (PSU) in
open market is a capital receipt as it reduces the assets of the government.
(a) Statement 1 is true and statement 2 is false (b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true (d) Both statements 1 and 2 are false
[1]
 Test # 07 | Chapter - 9

8. Statement 1: Direct taxes are those taxes whose impact and incidence lies on the same entity.
Statement 2: the liability of paying income taxes can be shifted. [1]
(a) Statement 1 is true and statement 2 is false (b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true (d) Both statements 1 and 2 are false

9. Assertion: To control deflation, the government may reduce the tax rates.
Reason: Reduction in taxes may increase the purchasing power in the hands of the general public which
will lead to a rise in Aggregate Demand, thereby controlling the situation of deflation. [1]
(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.

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(d) Assertion (A) is false but Reason (R) is true.

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10. From the following information calculate revenue receipts. Non Debt creating Capital Receipts = 25000,
Revenue Deficit = 12000 , Interest payments = 7000, Revenue Expenditure = 20000 , Capital Expenditure

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= 35000 (All figures are in Rs. Crore). [1]

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(a) Rs. 8000 crore (b) Rs. 43000 crore (c) Rs. 15000 crore (d) Rs. 25000 crore

11.
bl
Calculate Revenue Deficit, Fiscal Deficit and Primary Deficit from the following data: [3]
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12. With valid reasons, classify the following into Capital receipts or Revenue receipts of the government: [3]
(i) Dividend received by the government from a Maharatan company.
(ii) Debt cleared by Sri Lanka Government to the Indian Government.
(iii) Financial assistance by the Government of USA for promoting girl education in India.
OR
From the information given in the diagram categorize the items into revenue receipts and capital receipts,
stating valid reasons. [3]

[2]
 Test # 07 | Chapter - 9

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13. (a) What are private goods and public goods? State any two examples of private goods and public goods
each. [2]
(b) “The Union Budget 2023 – 24 had proposed an allocation of Rs. 22,138 crore to the Micro, Small
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and Medium Enterprise (MSME) Ministry.” Identify and explain the objective that the government is
trying to achieve with the proposed expenditure. [2]
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(a) Differentiate between public provision and public production. [2]

(b) ‘Under the Ayushmaan Bharat Scheme, the Government provides free medicines to the economically
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backward section of the society’. Identify and discuss the nature of the government expenditure indicated
in the given statement. [2]
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14. The Finance Minister of India Nirmala Sitharaman has secured the fiscal deficit at 6.8% for the fiscal year
2021-22 and has targeted to bring it lower to 4.5% of GDP by 2025-26. During the pandemic, the deficit
reached 9.5% of GDP because of two reasons: First, a fall in revenue of the government and negative
economic growth. Second, increased non-development expenditure to provide food and other essentials
to vulnerable groups as well as Rs 20 lakh crore stimulus package to revive the economy. [4]
Source: Article published in The Hindu on 1 February 2021
(a) Mention the objectives government is trying to achieve by a stimulus package of Rs. 20 lakh crores?
(b) What category of expenditure does the cost incurred on providing essential goods to vulnerable groups
during the pandemic fall under _________. (capital expenditure/revenue expenditure/development
expenditure)
What is the rationale behind including it in that specific category?

[3]
 Test # 07 | Chapter - 9

(c) How has the Finance Minister of India, planned to address the fiscal deficit in the coming years, and
what is the target set for reducing it by 2025- 26, according to the information provided in the paragraph?

15. (a) A budget can be deficit, surplus or balanced.” Do you agree with the given statement? Give valid
reasons in support of your answer. [2]
(b) "In the recent times, the Government of India has incurred a lot of expenditure on acquisition of
indigenous defence items under 'Make-in-India' programme." Identify and discuss the two types of
budget expenditures which may be undertaken by the Government as suggested in the above statement.
[2]

16. (a) “Tax revenues, an important component of revenue receipts, can be further classified into two categories.”
Imagine yourself as a member of Department of Revenue of the Government of India. Help your friend
to identify and differentiate between the two categories of taxes. [3]

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(b) "Government has started spending more on providing free services like education and health to the

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poor."
In the light of above statement, explain how the government can use the budgetary policy in reducing

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'inequalities of income'. [3]

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17. (a) Government across nations are too much worried about the term fiscal deficit. Do you think that Fiscal
Deficit is necessarily inflationary in nature? Support your answer with valid reasons.
bl [3]
(b) Study the following chart carefully and analyse the changing trends in the government expenditure on:
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[3]
(I) Transport
(II) Rural Development
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[4]