Q. What does a balanced budget imply?
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A.
Expenditures exceed revenues
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B.
Revenues exceed expenditures
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C.
Revenues equal expenditures
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D.
No budget is prepared
Solution
A balanced budget implies that the government's revenues are equal to its expenditures, indicating fiscal discipline.
Correct Answer:
C
— Revenues equal expenditures
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Q. What is the primary goal of fiscal management?
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A.
Maximizing government revenue
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B.
Ensuring economic stability
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C.
Reducing unemployment
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D.
Increasing public sector investment
Solution
The primary goal of fiscal management is to ensure economic stability by managing government finances effectively.
Correct Answer:
B
— Ensuring economic stability
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Q. What is the primary purpose of budgeting in fiscal management?
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A.
To increase government revenue
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B.
To allocate resources efficiently
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C.
To reduce public debt
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D.
To control inflation
Solution
Budgeting helps in allocating resources efficiently by planning expenditures and revenues, ensuring that funds are directed towards priority areas.
Correct Answer:
B
— To allocate resources efficiently
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Q. What is the role of the Reserve Bank of India (RBI) in fiscal management?
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A.
Setting fiscal policy
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B.
Managing government accounts
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C.
Regulating stock markets
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D.
Controlling inflation directly
Solution
The RBI manages government accounts and facilitates the government's borrowing program, playing a crucial role in fiscal management.
Correct Answer:
B
— Managing government accounts
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Q. What is the significance of capital budgeting?
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A.
It focuses on short-term financial planning
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B.
It assesses long-term investment projects
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C.
It determines tax policies
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D.
It manages daily operational costs
Solution
Capital budgeting is significant as it assesses long-term investment projects to determine their feasibility and potential returns.
Correct Answer:
B
— It assesses long-term investment projects
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Q. Which financial instrument is commonly used for government borrowing?
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A.
Stocks
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B.
Bonds
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C.
Mutual funds
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D.
Derivatives
Solution
Bonds are commonly used as financial instruments for government borrowing, allowing governments to raise funds from investors.
Correct Answer:
B
— Bonds
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Q. Which fiscal policy tool is primarily used to influence economic activity?
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A.
Taxation
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B.
Interest rates
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C.
Reserve requirements
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D.
Open market operations
Solution
Taxation is a primary fiscal policy tool used by governments to influence economic activity by adjusting tax rates and tax revenues.
Correct Answer:
A
— Taxation
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Q. Which of the following best describes 'fiscal policy'?
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A.
Regulation of money supply
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B.
Government spending and taxation decisions
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C.
Control of interest rates
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D.
Management of foreign exchange
Solution
Fiscal policy refers to government spending and taxation decisions aimed at influencing economic activity.
Correct Answer:
B
— Government spending and taxation decisions
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Q. Which of the following is a key component of a government budget?
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A.
Monetary policy
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B.
Fiscal deficit
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C.
Interest rates
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D.
Inflation targeting
Solution
Fiscal deficit is a key component of a government budget as it indicates the difference between the government's total revenue and total expenditure.
Correct Answer:
B
— Fiscal deficit
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Q. Which of the following is NOT a method of budgeting?
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A.
Zero-based budgeting
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B.
Incremental budgeting
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C.
Performance budgeting
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D.
Dynamic budgeting
Solution
Dynamic budgeting is not a recognized method of budgeting; the other three are established budgeting techniques used in fiscal management.
Correct Answer:
D
— Dynamic budgeting
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