Tag: meaning and scope of public finance

Questions Related to meaning and scope of public finance

What is the budgetary deficit?

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. It is the difference between all receipts and expenditure.

  2. It is the difference between all expenditure and receipts.

  3. The difference between government loans and credits recovered.

  4. Government assets and liabilities.

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Correct Option: A

In India, deficit can be financed by _________.

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. borrowing from the RBI

  2. borrowing from the commercial banks

  3. issue of new currency

  4. all of the above

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Correct Option: D

Deficit financing means financing of _________.

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. public expenditure which is in excess of public revenue

  2. public revenue which is in excess of public expenditure

  3. both (a) and (b)

  4. none of the above

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Correct Option: A

What does an increase in the ratio of revenue deficit to gross fiscal deficit indicate?

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. An increase in investment

  2. An increase in the utilisation of borrowed funds for revenue purposes

  3. An increase in the utilisation of borrowed funds for imports

  4. An increase in the utilisation of borrowed funds for lending

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Correct Option: B
Explanation:

$Revenue\ deficit:$ Revenue expenditure of the Central Govt is composed of plan and non-plan expenditure of the Government and is met out of revenue receipts. In case of a gap in the revenue receipts and revenue expenditure, where the expenditure is on the higher side, there exists a revenue deficit which is financed from borrowed funds.


$Fiscal\ deficit$ is the sum of budgetary deficit and the borrowed liabilities of the government for deficit financing. It indicates the total deficit of the fiscal policy. 

An increase in the ratio of revenue deficit to gross fiscal deficit would indicate higher revenue deficit, which requires use of deficit financing/borrowing for the purpose of revenue expenditure, i.e, into those avenues which would not generate any productive returns in the future.

Match List-I with List-II and select the correct answer using the code given the lists.

List-I (Type of budget deficit) List-II (Measurement of deficit)
A. Revenue Deficit $1$. Gap between total expenditure and total receipts
B. Fiscal Deficit $2$. Excess of revenue expenditure over revenue receipts
C. Primary Deficit $3$. Fiscal deficit less interest payments
D. Budgetary Deficit $4$. Difference between revenue receipts plus certain non-debt capital receipts and the total expenditure including loans, net of repayments
economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. A-$1$, B-$2$, C-$3$, D-$4$

  2. A-$2$, B-$4$, C-$3$, D-$1$

  3. A-$2$, B-$3$, C-$4$, D-$1$

  4. A-$1$, B-$4$, C-$3$, D-$2$

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Correct Option: B
Explanation:

Revenue Deficit: It occurs when the actual amount of revenue expenditure and actual amount of received revenue do not match.
Fiscal Deficit: Fiscal deficit is an economic phenomenon, calculated as the budget deficit, plus the borrowings of the government.
Primary Deficit: Primary deficit is obtained by subtracting interest payments from fiscal deficit of any country of a particular year. It is the deficit in the fiscal budget, unaccounted for any borrowing related interest payments.
Budgetary Deficit: A budgetary deficit is a common economic phenomenon, which occurs when the spending of a government exceeds the government revenue. 

Fiscal deficit as a percent of GDP in 2010-11 was _______.

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. 5.6%

  2. 2.7%

  3. 4.8%

  4. 4.1%

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Correct Option: C

If borrowings and other liabilities are added to the budget deficit it is termed as __________.

economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

  1. fiscal deficit

  2. primary deficit

  3. capital deficit

  4. revenue deficit

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Correct Option: A