Question 1

Which of the following could be a reason for raising public loans by a country?&#10;A)Bringing gap between revenue and expenditure through temporary loans from central bank.&#10;B)To reduce depression in the economy and financing public works program.&#10;C)Financing the public sector for expanding and strengthening the public enterprises&#10;D)All of the above

Accepted Answer

All the options provided are valid reasons for a country to raise public loans. Public loans can be used to bridge the gap between revenue and expenditure, stimulate the economy during periods of depression through public works programs, and finance the expansion or strengthening of public enterprises.

Question 2

Public Debt has a secular tendency to go up in every country. Which of the following are reasons contributing to such a trend?&#10;A)Increase trend in Financing of Public works programs&#10;B)Increasing trend in Financing for Economic Development&#10;C)Undertaking of Welfare Schemes by the Government&#10;D)All of the above

Accepted Answer

All the options listed contribute to the secular trend of increasing public debt. Financing public works, economic development, and welfare schemes all require significant government expenditure, which often leads to borrowing and an increase in public debt.

Question 3

Expenditure incurred by the Government on building durable assets, like highways, multipurpose dams, irrigation projects are in the nature of&#10;A)Capital Expenditure&#10;B)Revenue Expenditure&#10;C)Transfer Expenditure&#10;D)Unproductive Expenditure

Accepted Answer

Capital Expenditure is incurred when the government spends money on creating fixed assets like highways, dams, and irrigation projects. These are investments that are expected to provide benefits over a long period, hence classified as capital expenditure.

Question 4

Which of the following describes the situation where revenues and expenditures are equal during a given period?&#10;A)Public Debt&#10;B)Budget Surplus&#10;C)Balanced Budget&#10;D)Budget Deficit

Accepted Answer

A balanced budget occurs when revenues and expenditures are equal during a given period, meaning the government or organization neither owes nor is owed money at the end of the fiscal period.

Question 5

Old age pension is &#34;National Old Age Pension Schemes&#34;, &#34;Interest payments&#34;, &#34;Subsidies&#34;, &#34;Unemployment allowances&#34;, &#34;Welfare benefits to weaker sections, etc.&#34; By incurring such expenditure, the government does not get anything in return, but it adds to the welfare of the people, especially belong to the weaker sections of the society. Such expenditure basically results in redistribution of money incomes within the society.&#10;A)Non-Transfer Expenditure&#10;B)Transfer Expenditure or transfer payments&#10;C)Capital Expenditure&#10;D)Non-Distributive Expenditure

Accepted Answer

Transfer Expenditure or transfer payments are those where the government does not receive any goods or services in return, but these payments are made to redistribute income within society, such as old age pensions, subsidies, and welfare benefits.

Question 6

With increase in urbanization and industrialization, the role of Government started:&#10;A)Declining&#10;B)Increasing&#10;C)Stagnant&#10;D)Unstable

Accepted Answer

With the rise of urbanization and industrialization, governments have had to take on more responsibilities, such as regulating industries, providing public services, and ensuring the welfare of their citizens, leading to an increase in their role.

Question 7

The ratio of change in the national income in relation to the change in government spending that causes it is referred to as:&#10;A)Fiscal Multiplier&#10;B)Spending Ratio&#10;C)Expenditure Ratio&#10;D)Cost Multiplier

Accepted Answer

The Fiscal Multiplier refers to the ratio of a change in national income to the change in government spending that initiates it. It measures the effectiveness of fiscal policy in influencing the level of economic activity.

Question 8

Expenditures incurred on civil administration, defence forces is in the nature of&#10;A)Capital Expenditure&#10;B)Revenue Expenditure&#10;C)Transfer Expenditure&#10;D)Productive Expenditure

Accepted Answer

Revenue Expenditure refers to the spending on the day-to-day functioning of the government and its various departments, including salaries, pensions, interest payments, and expenses on civil administration and defence forces. These do not result in the creation of assets.

Question 9

The practice by Governments in which a government spends more money than it receives as revenue is referred to as:&#10;A)Piggy backing&#10;B)Direct Funding&#10;C)Deficit financing&#10;D)Pump Priming

Accepted Answer

Deficit financing refers to the practice where a government spends more money than it receives in revenue, often covered by borrowing or minting new funds.

Question 10

Expenditure on defence, interest payments, law and order maintenance and public administration expenses are generally treated as:&#10;A)Productive Expenditure&#10;B)Unproductive Expenditure&#10;C)Growth-oriented Expenditure&#10;D)Progressive Expenditure&#10;

Accepted Answer

Expenditure on defence, interest payments, law and order maintenance, and public administration expenses are generally treated as unproductive expenditure because they do not directly contribute to the production of goods and services or generate revenue. These expenses are necessary for the functioning of the state but do not directly stimulate economic growth.

Question 11

Developmental expenditure refers to&#10;A)Revenue Expenditure incurred for meeting current expenses of the Government&#10;B)Capital Expenditure incurred for creating long-term assets of the Government&#10;C)Expenditure which is incurred on activities directly related to economic development&#10;D)Expenditure which is incurred on running the normal government administration

Accepted Answer

The answer of Developmental expenditure refers to&#10;A)Revenue Expenditure incurred for...

Question 12

The multiplier effect is best described as:&#10;A)the increase in final income arising from any new injection of spending&#10;B)the increase in the expenditure of a country&#10;C)the increase in the public debt of a country&#10;D)the increase in investment of a country

Accepted Answer

The answer of The multiplier effect is best described as:&#10;A)the...

Question 13

in order to influence spending on goods and services in the short-run, monetary policy is directed at directly influencing...&#10;A)unemployment rates.&#10;B)inflation rates.&#10;C)interest rates.&#10;D)economic growth rates.&#10;

Accepted Answer

The answer of in order to influence spending on goods...

Deck 8: Understanding Public Finance and Business Cycles