Q. What does a budget deficit indicate?
-
A.
Government spending exceeds revenue
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B.
Government revenue exceeds spending
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C.
Balanced budget
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D.
Surplus budget
Solution
A budget deficit occurs when government spending exceeds its revenue, indicating a shortfall.
Correct Answer:
A
— Government spending exceeds revenue
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Q. What is the effect of expansionary fiscal policy?
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A.
Decrease in aggregate demand
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B.
Increase in aggregate demand
-
C.
No effect on the economy
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D.
Increase in interest rates
Solution
Expansionary fiscal policy aims to increase aggregate demand through increased government spending or tax cuts.
Correct Answer:
B
— Increase in aggregate demand
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Q. What is the primary goal of contractionary fiscal policy?
-
A.
Stimulate economic growth
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B.
Reduce inflation
-
C.
Increase employment
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D.
Boost consumer spending
Solution
The primary goal of contractionary fiscal policy is to reduce inflation by decreasing government spending or increasing taxes.
Correct Answer:
B
— Reduce inflation
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Q. What is the primary purpose of a government budget?
-
A.
To control inflation
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B.
To allocate resources
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C.
To manage public debt
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D.
To regulate the banking sector
Solution
The primary purpose of a government budget is to allocate resources effectively to various sectors of the economy.
Correct Answer:
B
— To allocate resources
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Q. What is the term for the total amount of money a government owes to creditors?
-
A.
Budget deficit
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B.
Public debt
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C.
Fiscal surplus
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D.
National savings
Solution
Public debt refers to the total amount of money that a government owes to its creditors.
Correct Answer:
B
— Public debt
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Q. Which institution is primarily responsible for implementing fiscal policy in India?
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A.
Reserve Bank of India
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B.
Ministry of Finance
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C.
Securities and Exchange Board of India
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D.
Planning Commission
Solution
The Ministry of Finance is responsible for formulating and implementing fiscal policy in India.
Correct Answer:
B
— Ministry of Finance
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Q. Which of the following is a component of fiscal policy?
-
A.
Interest rate adjustments
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B.
Taxation
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C.
Open market operations
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D.
Reserve requirements
Solution
Taxation is a key component of fiscal policy, which involves government spending and revenue collection.
Correct Answer:
B
— Taxation
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Q. Which of the following is a potential consequence of a high budget deficit?
-
A.
Lower interest rates
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B.
Increased public investment
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C.
Higher inflation
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D.
Decreased government spending
Solution
A high budget deficit can lead to higher inflation as the government may print more money to finance its deficit.
Correct Answer:
C
— Higher inflation
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Q. Which of the following is NOT a tool of fiscal policy?
-
A.
Government spending
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B.
Taxation
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C.
Monetary supply control
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D.
Public debt management
Solution
Monetary supply control is a tool of monetary policy, not fiscal policy.
Correct Answer:
C
— Monetary supply control
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