Economics 6 Marks Question

(i)Yes, a large fiscal deficit will leads to a higher revenue deficit in the future.
Reason for this:
A large fiscal deficit means large amount of borrowings. This creates a large burden of repayment of loans in future and interest payments. More interest payments will increase revenue expenditure. Hence, revenue deficit in future will increase.
(ii) i. It is a direct tax as its impact and incidence lie on the same person.
ii. It is an indirect tax as its impact and incidence lie on different persons.
iii. It is a direct tax as its impact and incidence lie on the same person.
iv. It is a direct tax as its impact and incidence lie on the same person.

(i). i. When intermediate consumption is zero.
ii. When Price in the base year = Price in the current year.
iii. When change in stock (or inventory investment) is zero.
iv. When there is no income in the form of interest.
(ii). a. Purchase or sale of financial assets like shares is not included while calculating national income. As such transactions are mere paper claims and do not lead to any value edition.
b. It will be included in the domestic income as Indian embassy is a part of domestic territory of India. However it will not be included in the national income as it is a part of factor income paid abroad. It is subtracted from domestic income to get national income.
c. It is not taken into consideration while calculating national income because it is not a financial expense that a producer has to bear.