Chapter 4
Income determination
Question 1: Y = C + I + G + Nx – What does NX stand for in this equation?
answer : Nigut export income.
Question 2: What kind of budget should the government prepare during inflation?
answer : Savings budget
Question 3: Give an example of non-tax revenue.
answer : fine.
Question 4: What is Rajhuwa drayya?
answer : Public goods are goods that are equally available to all citizens of a country.
Question 5: What is a balanced budget?
answer : A balanced budget is when the government's proposed revenue and proposed expenditure for the coming fiscal year are equal.
Question 6: Give an example of capital expenditure.
answer: Equity Investments.
Question 7: What is the Rajah Budget?
answer : The revenue budget includes the revenue received by the government and the expenditure incurred by the government from that revenue.
Q.8 What is the revenue deficit?
answer : The revenue deficit is the difference between total expenditure and total receipts excluding debt and other liabilities.
Question 9: What is the working budget?
answer : The Government Budget is a statement of the Government's proposed expenditure and proposed revenue for the coming fiscal year.
Question 10: What is the primary base?
answer : The primary deficit is obtained by excluding interest payments from the fiscal deficit.
Question 11: Give an example of tax revenue.
answer : Direct taxes.
Question 12: Give an example of public goods.
answer : public parks.
Question 13: Give an example of unplanned expenditure.
answer : Administrative expenses
Question 14: What is unequal budget?
answer : If government revenue and expenditure are not equal, it is called the Assam budget.
Question 15: Define savings budget.
answer : In a government budget, if total revenue exceeds total expenditure, it is called a surplus budget.
Question 16: Define deficit budget.
answer : A deficit budget is when total expenditure exceeds total revenue in a government budget.
Question 17: What is direct tax?
answer : Direct taxes are taxes that have the primary and final burden on the same person.
Question 18: Give an example of direct taxes.
answer : Income taxes.
Q.19 What is indirect tax?
answer : An indirect tax is a tax whose primary burden falls on one person but the ultimate burden falls on another person.
Question 20: Give an example of indirect taxes.
answer : Sales tax.
Question 21: What is capital budgeting?
answer : Government capital receipts and expenditures are included in the capital budget.
Question 22: Give an example of capital acquisition.
answer : Total receipts of loans.
Question 23: Give an example of capital expenditure.
answer : Loans to foreign governments.
Question 24: Give an example of incurred development expenditure.
answer : Defense expenditure.
Question 25: What is Raja Ghati?
answer : The revenue deficit is the revenue expenditure in excess of the government's revenue.
Question 26: What is deployment?
answer : Disinvestment is a system in which shares of a public sector enterprise are sold to private investors.
Q.27 What is tax?
answer : Taxes are the compulsory contributions made by the public for government expenditure.
Question 28: Is a balanced budget acceptable to the Government?
answer : No. Because the government should increase spending to boost demand during a recession.
Sample Question Answer No. 2:
Question 1: In an open economy, if the marginal consumption propensity (c) is 0.8 and the marginal import propensity (m) is 0.2, determine the value of the income multiplier.
answer : has dia, C = 0.8 m
M = 0.2 ...
Open economy multiplier = 1
1-c+m
= 1
1-0.8+0.2
= 1
0.4
= 2.5
Question 2: What is the revenue of a government budget?
answer : Government budget revenue includes tax revenue and non-tax revenue in the current receipts of the government. Similarly, revenue expenditure consists of plan revenue expenditure and non-plan revenue expenditure.
Question 3: Explain the significance of revenue land.
answer : Revenue land reflects the fiscal policy of the government. Revenue land implies that the government has borrowed even to maintain its consumption expenditure. This indicates the instability of the country's financial system.
Question 4: Define private goods and public goods.
answer : Private goods are goods that a person enjoys personally for a reasonable price. Public goods are goods that can be enjoyed equally by all citizens of a country.
Question 5: Name two sources of tax revenue.
answer : fines and fees.
Question 6: Name two main issues of unplanned expenditure of the government budget.
answer: (a) Expenditure on Defense
(b) Subsidies
Question 7: Write down two measures of fiscal policy to overcome the problem of excess demand in an economy.
answer :
(a) Increasing tax rates.
(b) Reduce revenue expenditure.
Question 8: Define budget deficit and trade deficit.
answer : It's called a budget deficit. A trade deficit is when the proposed expenditure of the government exceeds the proposed revenue. A trade deficit is when the price of imports exceeds the price of exports in foreign trade.
Question 9: Write down two allocation functions of the government.
answer : (a) Ensure the defense of the State.
(b) Construction and repair of roads.
Q.10 What are the two main components of the government budget?
answer: (a) Revenue Budget
(b) Capital budgeting
Question 11: Give two examples of direct taxes.
answer : income tax and property tax.
Question 12: Give two examples of indirect taxes.
answer : sales tax and excise duties.
Question 13: Give two examples of capital gains.
answer: (a) Recovery of Debt
(b) Loans and other liabilities.
Q.14 What is revenue expenditure? Give two examples.
answer : Expenditure that does not create wealth or reduce debt is called revenue expenditure. For example, expenditure on salaries and interest payments.
Question 15: What is capital expenditure? With two examples।
answer : Capital expenditure is expenditure that reduces the creation of wealth or services. For example, loans to foreign governments and public institutions.
Question 16: Write down two objectives of the government budget.
answer: (a) To achieve economic development.
(b) Establishment of social justice.
Q.17 What is fiscal policy?
Answer: Fiscal policy is when the income, price levels, employment and output levels of a country are affected by the investment of resources and the flow of capital through the control of government expenditure, revenue and debt.
Question 18: Write down two ways to reduce the government deficit.
answer: (a) Increasing taxes.
(b) Reduce government expenditure.
Question 19: Write down two characteristics of government budget.
answer: (a) The government budget is the proposed income and expenditure account.
(b) The budget shows planned income and planned expenditure.
Question 20: Write down two differences between direct taxes and indirect taxes.
answer: (a) Direct taxes are levied on income and property. However, indirect taxes are levied on goods and services.
(b) Direct taxes cannot be passed on but indirect taxes can be passed on.
Question 21: Write down two differences between tax revenue and non-tax revenue।
answer: (a) Tax revenue is the main source of government revenue, while non-tax revenue contributes little to government revenue.
(b) Sources of income tax, property tax, sales tax, tax revenue. On the other hand, fees, fines, donations, dividends, etc. are sources of non-tax revenue.
Question 22: Define increasing taxes and decreasing taxes.
answer : A tax rate that increases as the tax base increases is called a cumulative tax. A tax rate that decreases as the tax base increases is called a gradual tax.
Question 23: Give two examples of development expenditure.
answer : (i) Expenditure on agriculture.
(ii) Expenditure on research.
Question 24: Explain the significance of lightning cell deficit.
answer : The fiscal deficit means:
First, the fiscal deficit increases the money supply in the economy and creates inflationary problems.
Secondly, the fiscal deficit imposes a debt burden on future generations and hampers economic growth.
Sample Question Answer No. 4:
Q.1 What are the sources of government revenue? explain.
answer : Sources of government revenue can be divided into two main categories. These two categories are (1) tax receipts and (2) capital receipts
(1) Revenue: Revenue can be divided into two categories. (a) tax revenue and (b) non-tax revenue. Tax revenue can be divided into direct taxes and indirect taxes. Direct taxes include income tax, property tax, etc. Indirect taxes include sales tax and excise duty. Non-tax revenue includes fees, commercial revenue, fines, special rents, royalties, government property income, etc.
(2) Capital Receipts: Capital receipts include loans raised by the Government from the market, loans from the Central Bank, loans from foreign governments and financial institutions, repayment of loans granted by the Government.
Question 2: When does a government have a budget deficit?
Suppose total government expenditure is G = 150 and tax revenue is T = 0.2y| If the amount of national income (y) is 2000, what will be the state of the government budget?
answer : A budget deficit occurs when the government's proposed expenditure exceeds its proposed revenue in a given year.
is given
y = 2000
G = 150
T= 0.2y
In this,
tax revenue,
T = 0.2 (2000) [y = 2000 multiples]
= 400
So if government expenditure, G = 150, is smaller than tax revenue T = 400, the government budget will be a savings budget and it will support inflation.
Question 3: Explain the relationship between government deficit and government debt
answer: There is a close relationship between government deficit and debt. It can be thought of as a flow of deficit capital. It is added to the debt reserve and if the government resorts to debt for years, it has to pay more interest on the debt. This interest rate to be paid by the government also contributes to the public debt. When government debt decreases, investment decreases. This is because when the government collects debt from the public through the sale of mortgages, it takes away a large share of the total savings of the economy. If the government deficit succeeds in its goal of increasing output, income will rise. Again, if the government invests in infrastructure, future generations will benefit if the return on such investment is higher than the good rate. Then debt should not be considered a burden.
Q.4 What are the objectives of the Government Budget? Briefly describe these
answer : The objectives of the government budget are:
(a) Economic growth: Achieving rapid economic growth is an important objective of the government budget. When formulating budgetary policy it should be aimed at increasing savings and investment rates.
(b) Establishment of Social Justice: The budget sets the objectives of establishing social justice by addressing poverty and unemployment problems
(c) Price stability: The budget aims to maintain price stability by bombing inflation or deflation.
(d) Management of public institutions: The budgetary policy of the government emphasizes on increasing the rate of development through public institutions.
Question 5: Write the difference between planned and unplanned expenditure.
answer : Planned expenditure means the expenditure to be made on the program under the current Five Year Plan for the year. It is the expenditure on implementation of central planning programs related to various sectors of the economy.
On the other hand, expenditures unrelated to the current five-year plan are called unplanned expenditures. Unplanned expenditure is lower than planned expenditure.
Question 6: Explain the two functions of government expenditure and revenue system.
answer : (a) Resource acquisition: The government allocates public goods by providing them. The government provides the country with defence, roads, government administration, etc. and acquires resources.
(b) Distribution: The Government strives for equitable distribution through appropriate tax policies and expenditure policies. The government can transform the income distribution by altering the amount of private expendable income through the collection of transferable debt and taxes.
Q.7 What is meant by revenue deficit? Explain three situations that arise as a result of a revenue deficit।
answer : A revenue deficit occurs when the government's revenue expenditure exceeds its revenue.
The three situations that result in a revenue deficit are:
(a) Revenue deficits cause financial instability.
(b) Increased debt to cover the revenue deficit increases the interest burden in the future.
(c) The revenue deficit reduces government expenditure.
Question 9: Point out two advantages and two disadvantages of indirect taxes.
answer : The two advantages of indirect taxes are:
(a) Indirect taxes are wide ranging. It touches people at all levels.
(b) Indirect taxes may prevent the consumption of harmful goods as these taxes may cause a high increase in the prices of such goods.
The two disadvantages of indirect taxes are:
(a) Indirect taxes are not equitable due to their decreasing nature.
(b) Indirectly creates financial burden on the public on essential commodities.
Question 10: What are the categories of government revenue expenditure?
answer : Government revenue expenditure can be divided into four categories. Such sections are:
(a) Planned expenditures
(b) Unplanned expenditure.
(c) Development Expenses.
(d) Non-development expenditure.
Question 11: Write the difference between tax revenue and non-tax revenue.
answer: (a) Tax revenue is collected by the government from taxes. The kingdom of Anak collects from sources other than taxes.
(b) The taxpayer cannot claim any benefit in exchange for tax revenue. Benefits are provided in exchange for tax revenue.
(c) Tax revenue accounts for the bulk of government revenue. However, non-tax revenue contributes less to government revenue.
(d) Tax revenue is income tax, property tax, import duty, sales tax etc. The non-tax revenue is collected by the government from fees, fines, donations, contributions, dividends, etc.
Question 12: State the difference between revenue budget and capital budget.
answer: (a) The revenue budget includes the current revenues of the government, while the capital budget includes the revenues and expenditures collected by the government through the collection and sale of capital assets.
(b) The revenue budget includes the revenue receipts and revenue expenditure of the Government. However, the capital budget includes the government's capital receipts and expenditure.
(c) Revenue Budget revenue includes tax revenue and non-tax revenue, but is not included in the capital budget.
(d) Revenue expenditure of the revenue budget includes plan revenue expenditure, but capital expenditure of the capital budget includes plan capital expenditure and non-plan capital expenditure.
Q.13 Why is the value of the multiplier equal to one in a balanced budget?
answer : In a balanced budget, the value of the multiplier is equal to one because when government expenditure increases by 100 per cent, the amount of taxes for that expenditure increases by 100 per cent and the amount of income increases by 100 per cent. Induced spending is not possible due to tax increases.
Question 14: Explain the concept of balanced budget multiplier.
answer : The balanced budget multiplier is the ratio of revenue growth to government expenditure growth through tax collection. The value of such a budget multiplier is always equal to one. The balanced budget multiplier can be determined on the basis of the tax multiplier and the government expenditure multiplier. Since the value of the tax multiplier is less than the value of the government expenditure multiplier the budget will be balanced by an increase in government expenditure implemented through higher tax collections. The amount of increase in production will be equal to the amount of increase in government revenue.
The balanced budget multiplier is:
DY = 1 + - C = 1 - c =1
G 1 - c 1 - c 1 - c
Question 15: Explain the concept of transfer payment.
answer : Transfer payments are income that the residents of a country receive freely and do not have to pay any value in exchange for the memorial, either now or in the future. Such transfer payments can be government or private. For example, gifts, donations, donations from foreign governments, cash aid or grants, contributions from the UN or WHO.
Question 16: Explain how the automatic controller works।
answer : Proportional income makes spendable income and consumable expenditure less sensitive to fluctuations in GDP. When GDP rises, spendable income also rises but at a lower rate than the growth rate of GDP because a portion of it is taken away as taxes. When GDP declines during a recession, disposable income declines at a lower rate and consumption declines less than it would if taxes had remained constant. This reduces the decline in aggregate demand and stabilizes the economy.
Question 17: Briefly explain the distribution function of the Government.
answer Through tax and expenditure policies, the government seeks to ensure the proper distribution of income and resources in the economy. The government influences household spendable income through tax collection and transfer payments. Therefore, the government can change the distribution of income through income and expenditure policies. This is called the distribution function of the government.
Sample Question Answer No. 6:
Question 1: Briefly explain the components of the government budget.
answer : The government budget has two components: the revenue budget and the capital budget.
The revenue budget contains the revenue collected by the government and the revenue expenditure. There are two types of government revenue: tax revenue and non-tax revenue. Tax revenue can be direct taxes and indirect taxes. The burden and burden of direct taxes falls on the same person. The burden of indirect taxes falls on one person and the burden on another. Non-tax revenue includes fees, commercial revenue, fines, income from government property, special rent, royalty, donations and grants, loans, land finance etc.
The capital budget includes the income and expenditure collected by the government through the collection and sale of capital assets. Capital receipts include recovery of debt, loans and other liabilities, other receipts such as disinvestment of public sector enterprises. Capital expenditure is expenditure that reduces the creation of wealth or services. Expenditure on land purchase, loans to States and Union Territories, foreign governments, public institutions etc. are also capital expenditures.
