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Economics · 2023 · 6 marks
Government Budget and the EconomyGovernment Budget – Meaning and its Components6 marksUnderstandlong answer
CBSE 2023 · Region 3 · Set 2 · Q16
(a) (i) “In the recent times, the Government of India has incurred a lot of expenditure on acquisition of indigenous defence items under…
(i)
“In the recent times, the Government of India has incurred a lot of expenditure on acquisition of indigenous defence items under ‘Make-in-India’ programme.”
Identify and discuss the two types of budget expenditures which may by undertaken by the Government as suggested in the above statement.
(ii)
State any two examples of revenue expenditure of the Government.
(i)
Two friends, Deepak and Krish were discussing the impact of increase in GST rates on luxury items, as recently undertaken by the Government. Krish was of the view that most of the luxury items (like foreign travel, imported cigarettes, etc.) should be taxed exorbitantly, while the items related to daily consumption of poor and middle class should be tax-free. Identify and explain the objective of the Government budget Krish is suggesting.
(ii)
State the meaning of ‘primary deficit’ in the government budget.
Marking-scheme solution
(i)
Two types of budget expenditures on the acquisition of indigenous defence items under 'Make-in-India' programme which may be undertaken by the government are as follows :
Capital Expenditure - This refers to that expenditure of the government which either leads to creation of assets or reduction in liabilities.
Revenue Expenditure - This refers to that expenditure of the government which neither leads to creation of assets nor reduction in liabilities.
(ii)
Salaries paid to public sector employees.
Subsidies provided to households and firms by the government.
(i)
Krish is suggesting the objective of ‘Re-distribution of income’ to reduce income inequalities in the economy.
To ensure equitable distribution of income, the government may impose higher taxes on luxury items. This will reduce the purchasing power in the hands of rich.
On the other hand, lower/no taxes may be imposed on commodities purchased by poorer section of society. They may also be provided with subsidies on the essential commodities. This may increase their disposable income.
These steps may promote economic welfare through re-distribution of income in the economy.
(ii)
Primary deficit refers to the excess of fiscal deficit over interest payments.
Primary Deficit = Fiscal Deficit – Interest Payments
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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.