(a) (i) From the information given in the diagram, categorize the items into revenue receipts and capital receipts, stating valid reasons. WHERE…

Revenue receipts: Corporation tax, Customs, Income tax, Non-tax revenue, GST and other taxes, Excise duties.

Reason: Revenue receipts neither leads to decrease in assets nor increase in liabilities.

Capital receipts: Borrowing and other liabilities, Recovery of loan.

Reason: Capital receipts either leads to decrease in assets or increase in liabilities.

The revenue deficit refers to the excess of estimated revenue expenditure over the estimated revenue receipts of the government, during a fiscal year.

Whereas;

Fiscal deficit is the excess of the total estimated expenditure over its total estimated receipts excluding borrowings of the government, during a fiscal year.

Primary deficit = {(i) + (iv) – (ii)} – (v)

= {$\displaystyle 40$ + $\displaystyle 220$ - $\displaystyle 190$} – $\displaystyle 20$

= ₹ $\displaystyle 50$ crore.

The government may need to correct the fluctuations (income, employment and prices) in the economy. These may depend upon the level of Aggregate Demand, which in turn depends upon the spending decision of households and firms.

To stabilize the economy, under the state of inflation/deflation, Government may alter taxes/expenditure, accordingly.