Distinguish between:

1. Direct tax and indirect tax.
2. Revenue deficit and fiscal deficit.

Differentiate between Revenue Budget and Capital Budget.

Read the passage given below and answer the following questions from 1 to 4. India has scaled back expenditure, including on productive assets that aid economic growth, as the government is confronted with the risk of its budget deficit blowing out. Capital expenditure-the money spent on creating, maintaining or improving fixed assets like roads and factories-Stood at 40% of the budgeted amount in the six months to September, down from 55.5% in the year-ago period, data from the government's Controller General of Accounts show. The overall spending during the period was 49% of the budget aim compared to 53% last year. That's despite Prime Minister Narendra Modi's Government outlining measures worth more than 21 trillion rupees (281 billion) to counter the economic and social fallout of the Covid-19 outbreak. A closer look at the numbers shows the bulk of the spending was directed towards the poor and the farmers, with crucial sectors such as coal, power, shipping and steel receiving less than a third of their annual budget allocation. Spending on capital assets has so far trailed the so-called revenue expenditure that includes interest payments and overheads such as salaries, the data released last week showed. Modi's Government placed spending curbs on some ministries from April through December to manage its cash flow. Source: Business Standard, Nov. 5, 2020

1. Capital expenditure of the government ............ the assets of the government:

1. Increases
2. Decreases
3. Both [a] and [b]
4. None of these

2. Expenditure on health due to Covid-19 is ............ expenditure of the government.

1. Direct
2. Revenue
3. Both [a] and [b]
4. None of these

3. The overall spending has......... as compared to last year.

1. Increased
2. Decreased
3. Both [a] and [b]
4. None of these

4. A closer look at the numbers shows the bulk of spending was directed towards the poor and the.............?

1. Farmers
2. Labour
3. Manager
4. None of these

 
 

If you are appointed as the Finance Minister of India, which taxes would you prefer, direct taxes or indirect taxes and why?

Discuss the issue of deficit reduction.

What are implications of fiscal deficit?

Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

Distinguish between ‘fiscal deficit’ and ‘revenue deficit’. What does fiscal deficit indicate?

Distinguish between:

1. Capital receipts and revenue receipts.
2. Direct tax and indirect tax.