Government Budget: Receipts and Expenditure for CUET Economics

AnswerB · a statement of the government's estimated receipts and expenditure for a financial year

1. The Constitution calls it the Annual Financial Statement (Article 112).

2. It covers one financial year, April to March.

AnswerD · Annual Financial Statement (Article 112)

1. Article 112 requires the government to place an Annual Financial Statement before Parliament.

2. The Economic Survey is a separate review released before the budget.

AnswerB · the revenue budget and the capital budget

1. The revenue budget has revenue receipts and revenue expenditure; the capital budget has capital receipts and capital expenditure.

AnswerC · the Union Finance Minister

1. The Finance Minister presents the budget; the President causes it to be laid before Parliament under Article 112.

AnswerB · Maximising the profits of private firms

1. The budget serves allocation, redistribution, stability and growth; private profits are not its aim.

AnswerA · A-II, B-IV, C-I, D-III

1. Taxing the rich and helping the poor redistributes; tax breaks steer resources to chosen uses.

2. Spending cuts in inflation stabilise; district funds narrow regional gaps.

AnswerC · allocation of resources

1. Public goods are non-excludable, so private firms cannot charge for them easily; the government provides them.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Since the market cannot collect payment, it under-supplies public goods, and the government steps in. R explains A.

AnswerB · Only II

1. India's financial year runs from 1 April to 31 March. I is false.

2. Redistribution through taxes and transfers is a budget objective. II is true.

AnswerD · 1 February

1. The date was moved from the last working day of February to 1 February from 2017, so that the budget is passed before the year starts on 1 April.

AnswerC · neither create a liability nor reduce the government's assets

1. Taxes, fees and dividends are not paid back and do not use up assets: revenue receipts.

AnswerD · Interest on loans to states

1. Interest on loans is earned by the government without taxing anyone.

2. The others are taxes.

AnswerA · A-III, B-I, C-IV, D-II

1. Taxes and dividends are revenue receipts; bonds create debt and share sales reduce assets, so both are capital receipts.

AnswerB · ₹1,800 crore

1. Revenue receipts = tax revenue + non-tax revenue = 1,500 + 300 = ₹1,800 crore.

AnswerC · A-IV, B-III, C-II, D-I

1. Fees pay for a service; fines punish; escheat is property that passes to the state; profits come from public enterprises.

AnswerA · Only I

1. A grant is not repaid and creates no liability. I is true.

2. A loan must be repaid, so it is a capital receipt. II is false.

AnswerD · Money borrowed from the RBI

1. Borrowing creates a liability, so it is a capital receipt.

AnswerD · ₹2,720 crore

1. Revenue receipts 1,800 + capital receipts 920 = ₹2,720 crore.

AnswerD · A is false, but R is true.

1. R is true: selling shares gives up an asset.

2. Any receipt that reduces assets is a capital receipt, so A is false.

AnswerA · burden falls on the person on whom it is levied and cannot be shifted

1. Income tax is paid by the earner and borne by the earner: impact and incidence are on the same person.

AnswerB · Goods and Services Tax (GST)

1. GST is collected by sellers and passed on to buyers in the price, so its burden is shifted.

AnswerC · corporation tax

1. Corporation tax is a direct tax on company income.

AnswerD · A-II, B-I, C-IV, D-III

1. Income and corporation tax are direct; GST and customs duty are indirect.

AnswerA · the rate of tax rises as income rises

1. India's income tax slabs charge higher rates on higher incomes, which helps redistribution.

AnswerC · 2017

1. GST replaced many central and state indirect taxes from 1 July 2017.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. An indirect tax charges the same on a packet of salt whoever buys it, so it falls harder on the poor.

2. A progressive direct tax takes more from the rich. R explains A.

AnswerB · Only II

1. Corporation tax is levied on and paid from company profits: a direct tax. I is false.

2. Sellers add indirect taxes to prices. II is true.

AnswerB · Only II

1. GST is levied on goods and services and passed on in prices: indirect. I is false.

2. Higher income slabs face higher rates. II is true.

AnswerD · Neither I nor II

1. GST is shared: the centre levies CGST and the states SGST, with IGST on inter-state supplies. I is false.

2. Customs duty is charged on goods and passed on in their prices: indirect. II is false.

AnswerD · either create a liability or reduce the government's assets

1. Borrowing creates a liability; disinvestment and recovery of loans reduce assets.

AnswerB · Recovery of loans given to state governments

1. When a loan is repaid, the government's asset (the loan) falls, so the receipt is a capital receipt.

2. Interest on that loan, though, is a revenue receipt.

AnswerC · ₹920 crore

1. Capital receipts = borrowings + recovery of loans + disinvestment = 800 + 50 + 70 = ₹920 crore.

AnswerB · ₹120 crore

1. Non-debt capital receipts do not create debt: recovery of loans + disinvestment = 50 + 70 = ₹120 crore.

AnswerC · the government selling part of its shares in public sector enterprises

1. Selling shares reduces the government's assets, so the money raised is a capital receipt.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Any receipt that creates a liability is a capital receipt. R explains A.

AnswerC · a capital receipt, because it must be repaid

1. Small savings are a liability of the government to depositors, so they are capital receipts.

AnswerC · A is true, but R is false.

1. A is true: recovery reduces an asset (the loan), so it is a capital receipt.

2. R is false: getting a loan repaid creates no liability.

AnswerA · Only I

1. Selling shares reduces assets but creates no debt. I is true.

2. Borrowing is debt by definition. II is false.

AnswerB · creates no asset and reduces no liability

1. Salaries, pensions, interest and subsidies are spent on running the government: revenue expenditure.

AnswerB · Payment of old-age pensions

1. Pensions create no asset and reduce no liability.

AnswerD · A-IV, B-III, C-I, D-II

1. Salaries and interest create no asset and reduce no liability; a highway is an asset; repaying a loan cuts a liability.

AnswerA · revenue expenditure

1. Interest neither creates an asset nor reduces the debt itself.

2. Only repaying the principal is capital expenditure.

AnswerD · revenue expenditure

1. The centre does not own any asset created with a grant, and the grant is not repaid.

2. So, for the centre, a grant is revenue expenditure.

AnswerA · A loan to a public sector company

1. Giving a loan creates a financial asset for the government (a claim on the borrower).

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Expenditure that creates assets is capital expenditure. R explains A.

AnswerB · Only II

1. Subsidies create no asset and reduce no liability: revenue expenditure. I is false.

2. Repayment reduces a liability. II is true.

AnswerB · ₹400 crore

1. Capital expenditure creates assets or reduces liabilities: railway line 300 + loan repayment 100 = ₹400 crore.

2. Salaries and interest (₹700 crore) are revenue expenditure.

AnswerA · capital expenditure

1. The shares are a financial asset for the government, so buying them is capital expenditure.

AnswerC · Both I and II

1. Salaries are running costs. I is true.

2. Aircraft are lasting assets. II is true.

AnswerD · A is false, but R is true.

1. R is true: the building is an asset.

2. But salaries create no asset and reduce no liability, so they are revenue expenditure. A is false.

AnswerC · estimated receipts equal estimated expenditure

1. Receipts = expenditure is balanced; receipts > expenditure is surplus; expenditure > receipts is deficit.

AnswerA · a deficit budget

1. Expenditure has exceeded non-borrowed receipts every year, so the government borrows: a fiscal deficit.

AnswerD · balanced

1. Receipts equal expenditure, so the budget is balanced.

AnswerB · deficit budget

1. Planned spending exceeds receipts by 300, which must be borrowed: a deficit budget.

AnswerB · A-II, B-III, C-IV, D-I

1. A deficit adds demand in a slump; a surplus removes demand in a boom.

2. A balanced budget is neutral in the simple view; a tax cut leaves more income in households' hands.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Net withdrawal of spending lowers AD. R explains A.

AnswerB · Only II

1. A surplus takes more in taxes than it spends, which lowers AD. I is false.

2. A deficit puts more spending into the economy than it takes out. II is true.