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Economics · 2023 · 6 marks
Government Budget and the EconomyGovernment Budget – Meaning and its Components6 marksAnalyselong answer
CBSE 2023 · Region 4 · Set 1 · Q17
(a) (i) "Government provides essential items like food grains almost free to the families below poverty line." Identify and explain the objective of…
(a)(i)
"Government provides essential items like food grains almost free to the families below poverty line."
Identify and explain the objective of the government budget indicated.
(ii)
Define the following :
(1)
Revenue deficit
(2)
Primary deficit
OR
(b)
State whether the following statements are true or false, with valid reasons :
(i)
High tax on higher income groups aims to achieve the 'reallocation of resources' objective of the Government.
(ii)
Borrowings are a revenue receipt of the government.
(iii)
Fiscal deficit always leads to inflation.
Marking-scheme solution
(i)
The government budget objective of 'Redistribution of Income' is indicated in the given statement.
Government can influence inequalities of income through taxes and public expenditure. It can impose taxes on the rich reducing their disposable income. It can spend on free goods and services like food grains to the families below poverty line to ensure their welfare/ raising their standard of living.
(ii)(1)
Revenue deficit is defined as the excess of revenue expenditure of the government over its revenue receipts.
(2)
Primary deficit is defined as the difference between fiscal deficit and interest payments.
(i)
False. The government uses its taxation policy to improve the distribution of income and wealth. It indicates the objective of redistribution of income of the government budget.
(ii)
False. It is a capital receipt as it creates liability for the government.
(iii)
False. If the borrowings (i.e. fiscal deficit) are to be used for some developmental purposes, it may not be inflationary in nature. However, in other cases, it may be inflationary.
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CBSE Class 12 Economics past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.