taxes types, methods & budgeting process section 5 MCQ Questions & Answers Detailed Explanation

Answer: (b)

The opposite of crowding out is "crowding in" where private investment increases as debt-financed government spending increases.

If the economy is in a slowdown phase or the demand in the economy is less, then an increased government spending boosts the demand for goods which in turn increases the private sector demand for new output sources such as factories, equipment.

Thus, the private sector crowds in to satisfy increasing consumer needs.

Answer: (b)

The budget is discussed in two stages - the general discussion followed by a detailed discussion.

1st Feb 31st March Detailed Discussion On 1st Feb, the Finance bill is also introduced after the budget presentation.

Answer: (b)

Fiscal Deficit = Total Expenditure - Total Receipts except borrowing

= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)

= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)

= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing

= Total borrowing

= Net borrowing at home + borrowing from RBI + Borrowing from abroad

Let us understand with an example.

Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore

Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.

But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).

Hence, in the above example:

Fiscal Deficit = Total expenditure - total receipts except borrowing

Otherwise, the difference between total expenditure and total receipts will always be zero.

Answer: (d)

Answer: (c)

Corporation Tax is imposed by Central Government.

Answer: (c)