CBSE Board Exam 2020: Check Important Questions & Answers for Class 12 Economics - Chapter 5 (The Government Functions & Scope)

 If you are appearing for CBSE Class 12th Board exams 2020, check this list of important questions and answers from Chapter 5 of Macroeconomics.

Created On: Feb 5, 2020 13:30 IST
Important Questions & Answers for Class 12 Economics - Chapter 5
Important Questions & Answers for Class 12 Economics - Chapter 5

CBSE Class 12th Economic exam is scheduled for 13th March 2020. In this article we have complied a list of important questions from Chapter 5 of Part B (Macroeconomics): The Government Functions & Scope. Questions given below are important questions and are expected to be asked in Class 12 Economics board exam 2019-20.

Ques 1 How are capital receipts different from revenue receipts ? Discuss briefly.

Solution: Capital Receipts are those receipts of government which either lead to increase in its liabilities or reduction in its assets. For Example: receipts from recovery of loans, borrowings, receipts from disinvestment. whereas;

Revenue receipts are those receipts of government which neither lead to increase in its liabilities nor reduction in its assets. For example: income tax, profit of PSU, dividends, fees and fines etc.

CBSE Class 12 Syllabus 2020: All Subjects

Ques 2 Classify the following statements as revenue receipts or capital receipts. Give valid reasons in support of your answer.

(a) Financial help from a multinational corporation for victims in a flood affected area.

(b) Sale of shares of a Public Sector Undertaking (PSU) to a privatecompany, Y Ltd.

(c) Dividends paid to the Government by the State Bank of India.

(d) Borrowings from International Monetary Fund (IMF).

Solution: a) Revenue receiptof the government, as it is neither creating any liability nor reducing any assets for the government.

b) Capital receiptof the government, as it is reducing the assets of the government.

c) Revenue receipt of the government,as it is neither creating any liability nor reducing any assets for the government.

d) Capital receipt, as it is increasing the liability of the Government.

Ques 3 Primary deficit in a government budget will be zero, when ___________ . (Choose the correct alternative)

(a) Revenue deficit is zero

(b) Net interest payments are zero

(c) Fiscal deficit is zero

(d) Fiscal deficit is equal to interest payment

Solution: (d) Fiscal Deficit is equal to interest payment

Ques 4 Do ‘disinvestment’ and ‘loan proceeds from abroad’ constitute revenue receipts of the government ? Give reason.

Solution: i) No, Disinvestment are capital receipts of the government as it leads to reduction in assets.

Download CBSE Class 12 Economics Syllabus 2019-20 in PDF format

ii) No “loan proceeds from abroad” are capital receipts of the government as it increases the liabilities of the Government.

Ques 5 Given the following data estimate the values of (i) Revenue deficit, and (ii) Fiscal deficit :

 

S.No.

 

Particulars

 

Amount

(in < Crores)

1

Tax Revenue

1,000

2

Non-Tax Revenue

150

3

Net  Borrowings by Government

780

4

Disinvestment Proceeds

50

5

Revenue Expenditure

1,500

6

Capital Expenditure

480

 

Solution: i) Revenue Deficit = Total Revenue expenditure - Total revenue Receipt

= Revenue Expenditure - (Tax revenue + Non Tax revenue)

= 1500 – (1000 + 150 )

= 350 crores

  1. ii) Fiscal deficit = Total expenditure – (Revenue Receipt + Disinvestment proceeds)

= (1500+480) – (1000+150+50)

= 780 crores

Ques 6 Suppose you are a member of the ‘‘Advisory Committee to the Finance Minister of India’’. The Finance Minister is concerned about the rising Revenue Deficit in the budget. Suggest any one measure to control the rising Revenue Deficit of the government.

Solution:Measure to Control Revenue deficit:

a) To reduce government administrative expenses.

b) To reduce the burden of subsidy.

c) To increase taxation.

Ques 7 State any two examples of non-tax revenue.

Solution: Interest, dividends.

Download CBSE Class 12 Economics Syllabus 2019-20 in PDF format

Ques 8 Which 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)

Solution: c) sale of shares of a Public sector undertaking (PSU) to X Limited (Private Company)

Ques 9 State whether the following statements are true or false. Support your answer with reason.

(a) Taxation is an effective tool to reduce the inequalities of income.

(b) Revenue deficit increases when government fails to recover loans forwarded to different nations.

Solution: a) The given statement is true. Generally, the governments collect higher taxes from the rich people and spend it on the welfare of the poor. Thereby, reducing the inequalities of income.

b) The given statement is false, because recovery of loans is a capital receipt. It does not affect the revenue receipts.

Ques 10 What is meant by primary deficit and fiscal deficit?

Solution: Primary deficit is the difference between fiscal deficit and the interest payments made by the government. Fiscal deficit is the difference between the Government’s budgetary expenditure and its budgetary receipts excluding borrowings.

Ques 11 Discuss briefly the role of the government budget in influencing ‘‘allocation of resources’’ in the economy.

Solution: Through the budgetary policy, government allocates the resources of the economy. This may be in accordance with the economic and social priorities of the economy through the tax concessions/subsidies or directly producing goods and services.

Important Questions & Answers for Class 12 Economics - Chapter 1

Important Questions & Answers for Class 12 Economics - Chapter 2

Important Questions & Answers for Class 12 Economics - Chapter 3

Important Questions & Answers for Class 12 Economics - Chapter 4