Budget Basics — Set 5
Economics · बजट की मूल बातें · Questions 41–50 of 70
The 'Laffer Curve' relates which two variables in public finance?
Correct Answer: B. Tax rates and Tax revenue
The Laffer Curve suggests that there is an optimal tax rate that maximizes total revenue. If tax rates are too high, they may discourage work and actually reduce total collections. It is a fundamental concept in supply-side economics.
Which document acts as a link between the Budget and the Actual Performance of ministries?
Correct Answer: D. Outcome Budget
The Outcome Budget shifts the focus from 'how much money was spent' to 'what was achieved'. It tracks the physical progress of projects and schemes funded by the budget. India started presenting a comprehensive Outcome Budget in 2005.
What is the primary role of the 'Public Accounts Committee' (PAC)?
Correct Answer: C. To examine the audit reports of the CAG
The PAC is a parliamentary committee that ensures that the money spent by the government was used for the intended purpose. It scrutinizes the reports of the Comptroller and Auditor General. It helps in holding the executive accountable for public spending.
Which among the following is a 'Progressive Tax'?
Correct Answer: C. Personal Income Tax
In a progressive tax system, the tax rate increases as the taxable amount increases. Personal income tax in India is progressive because it uses slabs where higher income groups pay a higher percentage. This aims to reduce income inequality.
The term 'Crowding Out' effect in budgeting occurs when?
Correct Answer: A. High government borrowing reduces private investment
When the government borrows heavily to fund its deficit, it leaves less capital available for private businesses. This can lead to higher interest rates for everyone. It 'crowds out' private sector investment from the market.
The 'Contingency Fund' of a state is placed at the disposal of the?
Correct Answer: B. Governor
Similar to the President at the center, the Governor holds the state's contingency fund. It allows for emergency spending within the state jurisdiction. This is governed by Article 267(2) of the Constitution.
Which of the following is a major component of 'Capital Expenditure'?
Correct Answer: D. Loans given to states and UTs
Loans and advances given by the Union to State governments are categorized as capital expenditure. This is because these loans create a financial asset (a claim for repayment). Subsidies and interests are part of revenue expenditure.
What is the 'Effective Revenue Deficit' (ERD)?
Correct Answer: D. Revenue Deficit - Grants for asset creation
ERD is the revenue deficit minus those grants to states that were actually used to build assets like schools or hospitals. It gives a more accurate picture of the 'pure' consumption-based deficit. It was introduced in the Union Budget 2011-12.
The 'Finance Commission' is established under which Article?
Correct Answer: B. Article 280
Article 280 requires the President to constitute a Finance Commission every five years. It recommends the distribution of tax revenues between the Center and the States. This body is crucial for maintaining federal financial balance.
In India, the first 'Paperless Budget' was presented in which year?
Correct Answer: C. 2021
The Union Budget 2021-22 was the first to be delivered in a completely digital format. The Finance Minister used a tablet instead of the traditional briefcase or 'bahi-khata'. This move aligned with the 'Digital India' initiative.