Fiscal Policy Questions and Answers

Multiple Choice Questions and Answers (MCQ) on Fiscal Policy for Civil Services

Question 1 : Economic Survey in India is published by the 

a) Reserve Bank of India

b) NITI Aayog

c) Ministry of Finance, Government of India

d) Ministry of Industries, Government of India

Answer : c

Question 2 : Fiscal policy in India is formulated by

a) Reserve Bank of India

b) Planning Commission

c) Finance Ministry

d) Securities and Exchange Board of India

Answer : c

Question 3 : If we deduct grants to states for the creation of capital assets from revenue deficit, we arrive at

a) Primary defecit

b) Net fiscal deficit

c) Budgetary deficit

d) Effective revenue deficit

Answer : d

Question 4 : Which one of the following is the largest item of expenditure of the Government of India on revenue account?

a) Defence

b) Subsidies

c) Pensions

d) Interest payments

Answer : d

Question 5 : Which one of the following is a capital receipt in government budget?

a) Interest receipts on loans given by the government to other parties

b) Dividends and profits from public sector undertakings

c) Borrowing of the government from public

d) Income tax receipts

Answer : c

Question 6 : Equality in a country can be best brought through

a) Progressive expenditure

b) Regressive taxation

c) Regressive expenditure

d) None of the above

Answer : c

Question 7 : Fiscal deficit in the union budget is equal to 

a) Net increase in internal and external borrowings

b) The difference between current expenditure and current revenue

c) The sum of monetized deficit and budgetary deficit

d) Net increase in the union government’s borrowing from the Reserve Bank of India

Answer : a

Question 8 : Fiscal deficit implies:

a) Total expenditure – (Revenue receipts + Recovery of loans + Receipts from disinvestment)

b) Total expenditure – Total receipts from all sources ,including borrowings

c) Total expenditure – (Revenue receipts + Fresh loans)

d) Total expenditure – Disinvestment receipts

Answer : a

Question 9 : Fiscal Responsibility and Budget Management Act (FRBMA) was passed to keep check on

a) Fiscal deficit only

b) Revenue deficit only

c) Both fiscal deficit and revenue deficit

d) Neither fiscal deficit nor revenue deficit

Answer : c

Question 10 : According to the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 and FRBM Rules, 2004, the government is under obligation to present three statements before the Parliament along with the annual budget.

Which one of the following is not one of them?

a) Macroeconomic framework statement

b) Fiscal policy strategy statement

c) Medium-term fiscal policy statement

d) Short-term fiscal policy statement

Answer : d

Question 11 : Which of the following is not a component of revenue receipts of the union government?

a) Corporate tax receipts

b) Dividends and profits

c) Disinvestment receipts

d) Interest receipts

Answer : c

Question 12 : Every year the Economic Survey is compiled by :

a) Office of Economic Advisor

b) Central Statistical Office (CSO)

c) National Sample Survey Organisation (NSSO)

d) Department of Economic Affairs

Answer : d

Question 13 : Consider the following statements:

  1. India spends more than 1% of its GDP on Research and Development (R&D)
  2. The expenditure on R&D as proportion of GDP has increased in the past few years
  3. China incurs more than four times expenditure on R&D than that by India

Which of the statements given above is/are correct

a) 1, 2, and 3

b) 2 and 3 only

c) 1 and 2 only

d) 3 only

Answer : b

Question 14 : Which of the following is/are included in the capital budget of the Government of India?

  1. Expenditure on acquisition of fighter aircraft
  2. Financial assistance received from the World Bank
  3. Loans made to foreign governments
  4. Grants given to states and union territories every year

Select the correct answer using the codes given below:

a) 1 and 2 only

b) 2 and 3 only

c) 1, 3, and 4

d) 1, 2, and 3

Answer : d

Question 15 : Consider the following statements regarding plan and non-plan expenditure

  1. Plan expenditure is believed to be under the discretion of the central government, whereas non-plan expenditure is not part of discretion of the central government
  2. The distinction between plan and non-plan expenditures has been eliminated from Budget 2017-18 onwards.

Which of the statements given above is/are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Answer : c

Question 16 : Match List I with List II and select the correct answer using the codes given below the Lists

List I (Term) List II (Explanation)
1. Fiscal deficit (A) Excess of total expenditure over total receipts
2. Budget deficit (B) Excess of revenue expenditure over revenue receipts
3. Revenue deficit (C) Excess of total expenditure over total receipts less borrowings
4. Primary deficit (D) Excess of total expenditure over total receipts less borrowings and interest payments

a) 1-C, 2-A, 3-B, 4-D

b) 1-D, 2-C, 3-B, 4-A

c) 1-A, 2-C, 3-B, 4-D

d) 1-C, 2-A, 3-D, 4-B

Answer : a

Question 17 : Which of the following is/are components of public debt?

  1. Public borrowing
  2. Treasury bills
  3. Securities issued by RBI

Select the correct answer using the codes given below:

a) 1 only

b) 1 and 2

c) 2 only

d) 1,2, and 3

Answer : d

Question 18 : Match List I with List II and select the correct answer using the codes given below the lists.

Publisher Publication
1. Ministry of Commerce and Industry  (A) Report on Currency and Finance
2. Central Statistical Organisation  (B) Economic Survey
3. Reserve Bank of India  (C) Wholesale Price Index
4. Department of Economic Affairs  (D) National Accounts Statistics

a) 1-D, 2-C, 3-B, 4-A

b) 1-C, 2-D, 3-A, 4-B

c) 1-D, 2-C, 3-A, 4-B

d) 1-C, 2-D, 3-B, 4-A

Answer : b

Question 19 : With reference to revenue deficit, consider the following statements:

  1. It includes only those transactions that affect current income and expenditure of government.
  2. It considers the current borrowing by the government.
  3. As per the FRBM Act, the government is required to reduce the revenue deficit to 3% of the GDP

Which of the statements given above is/are correct?

a) 1 only

b) 1 and 2 only

c) 2 and 3 only

d) 1, 2, and 3

Answer : a

Question 20 : Budget deficit may lead to 

  1. Rise in the interest rates
  2. Fall in value of currency
  3. Increase in currency circulation

Which of the statements given above is/are correct?

a) 1 and 2 only

b) 1, 2, and 3

c) 1 and 3 only

d) 2 and 3 only

Answer : b

Question 21 : Which of the following items are included in revenue receipts?

  1. Tax revenue
  2. Non-tax revenue
  3. Recovery loans
  4. Borrowing and other liabilities

Select the correct answer using the codes given below:

a) 1 and 2 only

b) 1, 2 , and 3 only

c) 3 and 4 only

d) 1, 3, and 4 only

Answer : a

Question 22 : Which of the following is/are example of capital payment by the government?

  1. Loan repayment
  2. Interest payment on loan
  3. Purchase of defence technology

Select the correct answer using the codes given below:

a) 1 only

b) 1 and 3 only

c) 2 and 3 only

d) 1, 2 and 3

Answer : b

Question 23 : Which of the following developments can occur in an economy due to deficit financing?

  1. Rise in inflation
  2. Rise in government debt
  3. Increase in money supply
  4. Improvement in current account deficit

Select the correct answer using the codes given below:

a) 1 and 2 only

b) 1, 3 and 4

c) 2 and 4 only

d) 1, 2 and 3

Answer : d