Business Studies
Class: 12
Subject: Business Studies
Syllabus Covered: Entire CBSE Syllabus (Parts A & B – Units 1 to 12)
Part A: Principles and Functions of Management
Unit 1: Nature and Significance of Management
- Management is considered a process because:
a) It involves a series of inter-related functions
b) It is only applicable to large organizations
c) It requires huge capital investment
d) It focuses solely on achieving social objectives - Which characteristic of management highlights that it is required in all types of organizations?
a) Goal-oriented
b) Pervasive
c) Continuous
d) Intangible - Efficiency in management primarily concerns:
a) Doing the right task
b) Completing activities on time
c) Minimizing costs (Input-Output ratio)
d) Maximizing employee satisfaction
Unit 2: Principles of Management
4. Henri Fayol’s principle of ‘Division of Work’ applies to:
a) Technical work only
b) Managerial work only
c) Both technical and managerial work
d) Work of top management only
5. Which principle of scientific management suggests that there should be complete harmony between management and workers?
a) Science, not Rule of Thumb
b) Harmony, not Discord
c) Cooperation, not Individualism
d) Development of Each and Every Person to His Greatest Efficiency
6. The principle of ‘Unity of Command’ implies that an employee should receive orders from:
a) Multiple superiors for better coordination
b) Only one superior to avoid confusion
c) Both line and staff managers
d) The top management directly
Unit 3: Business Environment
7. Demonetization (2016) in India is an example of a change in which dimension of the Business Environment?
a) Economic Environment
b) Political Environment
c) Legal Environment
d) Technological Environment
8. Which characteristic of the Business Environment states that it consists of numerous interrelated and dynamic factors?
a) Totality of external forces
b) Dynamic nature
c) Inter-relatedness
d) Uncertainty
9. Understanding the business environment helps in:
a) Only identifying threats
b) Only tapping useful resources
c) Assisting in planning and policy formulation
d) Reducing employee turnover
Unit 4: Planning
10. Which step in the planning process involves setting clear objectives?
a) Developing premises
b) Identifying alternatives
c) Setting objectives
d) Evaluating alternatives
11. A policy is a type of plan which:
a) Provides detailed instructions for routine tasks
b) Is a single-use plan for a specific situation
c) Provides general guidelines for decision-making
d) States the expected results in numerical terms
12. Which limitation of planning suggests that it cannot guarantee success in a dynamic environment?
a) Planning leads to rigidity
b) Planning reduces creativity
c) Planning involves huge costs
d) Planning does not work in a dynamic environment
Unit 5: Organising
13. Organising as a process involves:
a) Only dividing work
b) Only assigning duties
c) Only establishing reporting relationships
d) Dividing work, assigning duties, and establishing authority relationships
14. Decentralisation refers to:
a) Concentrating decision-making authority at the top level
b) Systematic delegation of authority at all levels of management
c) Granting authority only to middle-level managers
d) Eliminating the need for authority
15. The organisation structure which promotes functional specialization but may lead to conflicting departmental goals is:
a) Functional structure
b) Divisional structure
c) Informal structure
d) Matrix structure
Unit 6: Staffing
16. Staffing function begins with:
a) Selection
b) Recruitment
c) Training
d) Manpower Planning
17. Which source of recruitment may lead to ‘inbreeding’ within the organisation?
a) External Sources
b) Internal Sources
c) Direct Recruitment
d) Campus Recruitment
18. Vestibule training is a method where:
a) Employees learn on the actual work site
b) Employees learn in a classroom
c) Employees learn on equipment identical to those used in actual work, but in a simulated environment
d) Employees learn by rotating through different jobs
Unit 7: Directing
19. Directing is called a ‘pervasive function’ because:
a) It is performed only by top managers
b) It is the first function of management
c) It is required at all levels and in all departments
d) It involves issuing orders only
20. According to Maslow’s Hierarchy, which need becomes dominant after physiological and safety needs are satisfied?
a) Esteem Needs
b) Self-Actualization Needs
c) Affiliation/Belongingness Needs
d) Basic Needs
21. Which communication network allows all members to communicate freely with each other?
a) Wheel Network
b) Chain Network
c) Circular Network
d) Free Flow Network
Unit 8: Controlling
22. The first step in the controlling process is:
a) Analysing deviations
b) Taking corrective action
c) Setting performance standards
d) Measurement of actual performance
23. Which function of management ensures that activities are performed as per plans?
a) Planning
b) Organising
c) Staffing
d) Controlling
24. ‘Management by Exception’, a principle of controlling, implies that managers should:
a) Focus only on major deviations
b) Focus only on minor deviations
c) Ignore all deviations
d) Resign if deviations occur
Part B: Business Finance and Marketing
Unit 9: Financial Management
25. The primary goal of Financial Management is:
a) Maximizing sales
b) Maximizing employee welfare
c) Wealth maximization (Maximizing shareholder value)
d) Minimizing market share
26. Which decision relates to how the firm’s funds are invested in different assets?
a) Financing Decision
b) Investment Decision
c) Dividend Decision
d) Working Capital Decision
27. Higher Financial Leverage generally means:
a) Lower use of debt
b) Higher use of debt
c) Equal use of debt and equity
d) No use of debt
Unit 10: Financial Markets
28. The market where existing securities are traded is known as:
a) Primary Market
b) Secondary Market
c) Money Market
d) Capital Market
29. Which institution regulates the securities market in India?
a) RBI
b) SEBI
c) NSE
d) BSE
30. Treasury Bills are instruments traded in the:
a) Capital Market
b) Secondary Market
c) Money Market
d) Foreign Exchange Market
Unit 11: Marketing Management
31. Marketing is a ________ process.
a) Social
b) Managerial
c) Social and Managerial
d) Only Selling
32. Which element of the marketing mix involves decisions regarding channels of distribution?
a) Product
b) Price
c) Place
d) Promotion
33. Branding, Packaging, and Labelling are part of which component of the marketing mix?
a) Product
b) Price
c) Place
d) Promotion
Unit 12: Consumer Protection
34. The Consumer Protection Act (COPRA), 2019 provides for the establishment of:
a) District Forum, State Commission, and National Commission
b) Lok Adalats only
c) Consumer Ombudsman
d) SEBI
35. Which consumer right ensures access to a variety of goods and services at competitive prices?
a) Right to Safety
b) Right to be Informed
c) Right to Choose
d) Right to Seek Redressal
36. The ‘Agmark’ logo is an example of a:
a) Brand
b) Certification Mark
c) Trademark
d) Patent
Project Work (Implicit Understanding)
37. While conducting a project on ‘Marketing Strategies of a Local Retailer’, the most appropriate primary data collection method would be:
a) Reading company annual reports
b) Searching the internet
c) Interviewing the shop owner and customers
d) Consulting textbooks
Mixed Application & Higher Order Thinking (Covering Multiple Units)
- If a manager is motivating employees by providing opportunities for growth (Unit 7) while ensuring their performance aligns with set standards (Unit 8), which two functions is she performing?
a) Staffing and Controlling
b) Directing and Controlling
c) Planning and Organising
d) Organising and Staffing - A company issuing new shares through an IPO is involved in the ________ market (Unit 10) to raise ________ capital (Unit 9).
a) Secondary; Fixed
b) Primary; Long-term
c) Money; Working
d) Spot; Venture - Standardization and Simplification (Unit 2: Scientific Management) in production would most directly impact which element of the Marketing Mix (Unit 11)?
a) Price (potentially lowering costs)
b) Place
c) Promotion
d) Product (features, quality consistency) - Setting clear objectives (Unit 4: Planning) for the marketing department helps in effectively performing the ________ function (Unit 8) later.
a) Organising
b) Staffing
c) Directing
d) Controlling - The ‘Right to be Informed’ (Unit 12) requires businesses to provide accurate details about the Product (Unit 11), especially concerning:
a) Only price
b) Only ingredients/contents
c) Price, ingredients, side effects, expiry date etc.
d) Distribution channels - Understanding the ‘Technological Environment’ (Unit 3) is crucial for making sound ________ Decisions (Unit 9).
a) Dividend
b) Working Capital
c) Investment (e.g., in new machinery)
d) Financing - Delegation of Authority (Unit 5: Organising) empowers subordinates, which is a key aspect of effective ________ (Unit 7: Directing).
a) Communication
b) Leadership
c) Motivation
d) Supervision - Effective ‘Staffing’ (Unit 6) through proper training helps in reducing ________ identified during the ‘Controlling’ (Unit 8) process.
a) Standards
b) Deviations
c) Resources
d) Objectives - SEBI’s regulation (Unit 10) aims to protect ________ (Unit 12) in the securities market.
a) Manufacturers
b) Investors (as consumers of financial services)
c) Employees
d) Government - A company focusing on ‘Consumer Satisfaction’ (Unit 11 & 12) needs ________ (Unit 7) employees who interact with customers.
a) Highly paid
b) Motivated and well-trained
c) Strictly controlled
d) Specialized in finance - Fayol’s ‘Esprit de Corps’ (Unit 2) promoting team spirit contributes positively to the ________ function (Unit 7).
a) Planning
b) Organising
c) Directing (specifically leadership and motivation)
d) Controlling - Changes in the ‘Legal Environment’ (Unit 3) regarding factory safety would require adjustments in ________ plans (Unit 4).
a) Production
b) Marketing
c) Financial
d) All of the above - ‘Working Capital Management’ (Unit 9) ensures a company can meet its short-term obligations, which is essential for maintaining ________ (Unit 11).
a) Product quality
b) High prices
c) Customer goodwill (e.g., timely deliveries, paying suppliers)
d) Extensive advertising
Answer Key:
- a) It involves a series of inter-related functions
- b) Pervasive
- c) Minimizing costs (Input-Output ratio)
- c) Both technical and managerial work
- b) Harmony, not Discord
- b) Only one superior to avoid confusion
- b) Political Environment (Government decision)
- c) Inter-relatedness
- c) Assisting in planning and policy formulation
- c) Setting objectives
- c) Provides general guidelines for decision-making
- d) Planning does not work in a dynamic environment
- d) Dividing work, assigning duties, and establishing authority relationships
- b) Systematic delegation of authority at all levels of management
- a) Functional structure
- d) Manpower Planning
- b) Internal Sources
- c) Employees learn on equipment identical to those used in actual work, but in a simulated environment
- c) It is required at all levels and in all departments
- c) Affiliation/Belongingness Needs
- d) Free Flow Network
- c) Setting performance standards
- d) Controlling
- a) Focus only on major deviations
- c) Wealth maximization (Maximizing shareholder value)
- b) Investment Decision
- b) Higher use of debt
- b) Secondary Market
- b) SEBI
- c) Money Market
- c) Social and Managerial
- c) Place
- a) Product
- a) District Forum, State Commission, and National Commission
- c) Right to Choose
- b) Certification Mark
- c) Interviewing the shop owner and customers
- b) Directing and Controlling
- b) Primary; Long-term
- d) Product (features, quality consistency)
- d) Controlling
- c) Price, ingredients, side effects, expiry date etc.
- c) Investment (e.g., in new machinery)
- b) Leadership
- b) Deviations
- b) Investors (as consumers of financial services)
- b) Motivated and well-trained
- c) Directing (specifically leadership and motivation)
- d) All of the above
- c) Customer goodwill (e.g., timely deliveries, paying suppliers)
Notes:
- Alignment: Questions strictly follow the NCERT Class 12 Business Studies textbooks and the latest CBSE syllabus structure/content.
- Balance: Mix includes Factual Recall (e.g., Q2, Q5, Q29), Conceptual Understanding (e.g., Q3, Q14, Q25), and Application-Based Reasoning (e.g., Q7, Q37, Q38, Q40, Q50).
- CBSE Pattern: Uses standard MCQ format, language, and complexity seen in CBSE board papers.
- Language: Clear, concise, and age-appropriate for Class 12 students.
- Coverage: All 12 units and Project Work understanding are represented. Key concepts like Management Principles, Functions, Environment, Finance, Markets, Marketing Mix, and Consumer Rights are thoroughly covered.
Accountancy
MCQs on Unit 1: Accounting for Partnership Firms
A. Fundamentals of Partnership & Partnership Deed
- The mutual relationship between partners is governed by:
a) Companies Act, 2013
b) Indian Contract Act, 1872
c) Indian Partnership Act, 1932
d) Sale of Goods Act, 1930 - Which of the following is NOT an essential feature of a Partnership?
a) Agreement between persons
b) Sharing of Profits of the business
c) Registration is compulsory
d) Mutual Agency - A written agreement among partners specifying the terms of partnership is called:
a) Memorandum of Association
b) Articles of Association
c) Partnership Deed
d) Prospectus - In the absence of a Partnership Deed regarding interest on capital:
a) Interest @ 6% p.a. is allowed
b) Interest @ 12% p.a. is allowed
c) No interest is allowed
d) Interest is allowed as per bank rate - According to the Partnership Act, 1932, profits and losses are shared by partners:
a) In the capital ratio
b) Equally
c) As per seniority
d) As decided by the active partners
B. Capital Accounts (Fixed & Fluctuating) & Profit & Loss Appropriation Account
- In which type of capital account system are all adjustments (interest, salary, profit/loss) made directly in the capital account?
a) Fixed Capital Account System
b) Fluctuating Capital Account System
c) Both systems
d) None of the above - Under the Fixed Capital Account system, partners’ capital accounts will show:
a) Only the initial capital introduced
b) All adjustments like interest, salary, drawings
c) Only profit/loss adjustments
d) Only drawings - The Profit and Loss Appropriation Account is prepared:
a) After the Profit and Loss Account
b) Before the Profit and Loss Account
c) Along with the Trading Account
d) It is the same as the Profit and Loss Account - Salary payable to a partner is debited to:
a) Trading Account
b) Profit and Loss Appropriation Account
c) Partner’s Capital Account
d) Profit and Loss Account - Interest on partners’ drawings is:
a) Debited to Profit and Loss Account
b) Credited to Profit and Loss Appropriation Account
c) Debited to Partner’s Capital Account
d) Credited to Partner’s Capital Account - If the partnership deed is silent, interest on partner’s loan to the firm is allowed at:
a) No interest
b) 6% p.a.
c) 12% p.a.
d) As agreed by partners - A’s Capital is Rs. 1,00,000. He is entitled to interest on capital @ 10% p.a. His share of profit is Rs. 15,000. What amount will be credited to his Capital Account under the Fluctuating Capital method?
a) Rs. 10,000
b) Rs. 15,000
c) Rs. 25,000
d) Rs. 1,25,000
C. Goodwill: Nature, Factors & Valuation
- Goodwill is considered as:
a) A Fictitious Asset
b) A Current Asset
c) An Intangible Asset
d) A Tangible Asset - Which of the following is NOT a factor affecting the value of goodwill?
a) Quality of Products
b) Location of Business
c) Value of Fixed Assets
d) Managerial Skill - The excess of actual profit over normal profit is called:
a) Average Profit
b) Capital Profit
c) Super Profit
d) Gross Profit - Goodwill is to be valued when:
a) A new partner is admitted
b) A partner retires or dies
c) There is a change in profit-sharing ratio
d) All of the above - Under the Average Profit Method, goodwill is calculated by:
a) Multiplying Super Profit by the number of years’ purchase
b) Capitalizing Super Profit
c) Multiplying Average Profit by the number of years’ purchase
d) Capitalizing Average Profit - Under the Super Profit Method, goodwill is calculated by:
a) Multiplying Average Profit by the number of years’ purchase
b) Capitalizing Average Profit
c) Multiplying Super Profit by the number of years’ purchase
d) Capitalizing Super Profit - The formula for calculating Super Profit is:
a) Normal Profit / Normal Rate of Return
b) Average Profit – Normal Profit
c) Average Profit – (Normal Rate of Return x Capital Employed)
d) Capital Employed x Normal Rate of Return - Under the Capitalisation of Super Profit Method, Goodwill = ?
a) Super Profit x Number of Years’ Purchase
b) (Super Profit / Normal Rate of Return) x 100
c) Average Profit x Number of Years’ Purchase
d) (Average Profit / Normal Rate of Return) x 100
D. Reconstitution of Partnership Firm (Change in PSR, Admission, Retirement/Death)
- Sacrificing Ratio is the ratio in which:
a) The incoming partner acquires his share
b) Old partners sacrifice their share of profit in favour of the new partner
c) The gain of profit by remaining partners is calculated
d) Profits are shared after admission - Gaining Ratio is calculated at the time of:
a) Admission of a partner
b) Retirement or death of a partner
c) Change in profit-sharing ratio among existing partners
d) Dissolution of the firm - When a new partner brings cash for his share of goodwill, the amount is generally credited to:
a) Sacrificing Partners’ Capital Accounts (in sacrificing ratio)
b) New Partner’s Capital Account
c) Goodwill Account
d) Revaluation Account - The Revaluation Account is prepared to record changes in the value of:
a) Only Assets
b) Only Liabilities
c) Assets and Liabilities
d) Capital Accounts - Any profit on revaluation of assets and liabilities at the time of admission is transferred to:
a) Old Partners’ Capital Accounts in Old Profit Sharing Ratio
b) All Partners’ Capital Accounts in New Profit Sharing Ratio
c) New Partner’s Capital Account
d) Revaluation Account - At the time of admission, unrecorded liabilities paid are debited to:
a) Liabilities Account
b) Revaluation Account
c) Partners’ Capital Accounts
d) Cash Account - The journal entry for recording an increase in the value of machinery at the time of admission is:
a) Debit Machinery A/c; Credit Revaluation A/c
b) Debit Revaluation A/c; Credit Machinery A/c
c) Debit Machinery A/c; Credit Partners’ Capital A/c
d) Debit Revaluation A/c; Credit Partners’ Capital A/c - When a partner retires, the amount due to him is paid according to:
a) Profit and Loss Account
b) Section 37 of the Indian Partnership Act, 1932
c) Companies Act
d) His wish - At the time of retirement, the accumulated profits (General Reserve) are transferred to:
a) All Partners’ Capital Accounts in Old Profit Sharing Ratio
b) Remaining Partners’ Capital Accounts in New Ratio
c) Retiring Partner’s Capital Account only
d) Revaluation Account - The deceased partner’s share of profit from the last Balance Sheet to the date of death is calculated based on:
a) Previous year’s profit
b) Average profit of past years
c) Estimated current year’s profit
d) Sales during the period - On the death of a partner, his executor is entitled to the deceased partner’s share in:
a) Capital only
b) Capital, accumulated profits, goodwill, and share in profit till death
c) Goodwill only
d) Accumulated losses only - The gaining ratio is calculated as:
a) New Ratio – Sacrificing Ratio
b) New Ratio – Old Ratio (for remaining partners)
c) Old Ratio – Sacrificing Ratio
d) Sacrificing Ratio – New Ratio - A and B share profits in the ratio 3:2. They admit C for 1/5th share, which he acquires equally from A and B. The sacrificing ratio is:
a) 3:2
b) 1:1
c) 1:1 (Acquires equally, so each sacrifices 1/10th)
d) 2:3 - X, Y, and Z are partners sharing profits 4:3:2. Y retires. X and Z decide to share future profits equally. The gaining ratio of X and Z is:
a) 4:2
b) 3:2
c) 1:1 (New Ratio Equal = 1:1; Old Ratio of X & Z = 4:2 or 2:1; Gaining Ratio = NR – OR: X = 1/2 – 4/9 = (9-8)/18 = 1/18; Z = 1/2 – 2/9 = (9-4)/18 = 5/18; Ratio = 1:5)
d) 5:1 - At the time of admission of a partner, the treatment of goodwill (premium) brought in cash by the new partner is:
a) Debit Cash A/c; Credit New Partner’s Capital A/c
b) Debit Cash A/c; Credit Sacrificing Partners’ Capital A/cs
c) Debit Goodwill A/c; Credit Cash A/c
d) Debit Sacrificing Partners’ Capital A/cs; Credit Goodwill A/c
E. Dissolution of Partnership Firm
- Dissolution of a Partnership Firm results in:
a) Change in profit-sharing ratio
b) Complete closure of business and settlement of all accounts
c) Admission of a new partner
d) Retirement of a partner - The account prepared to record the sale of assets and payment of liabilities upon dissolution is called:
a) Revaluation Account
b) Realisation Account
c) Profit and Loss Account
d) Capital Account - Upon dissolution, assets sold are transferred to:
a) Partners’ Capital Accounts
b) Realisation Account
c) Cash Account
d) Profit and Loss Account - Liabilities paid off by the firm on dissolution are transferred to:
a) Realisation Account
b) Partners’ Capital Accounts
c) Cash Account
d) Liability Account - Any unrecorded asset realised during dissolution is credited to:
a) Realisation Account
b) Partners’ Capital Accounts (Old Ratio)
c) Cash Account
d) Asset Account - Any loss on realisation (sale of assets) is debited to:
a) Partners’ Capital Accounts (in their profit-sharing ratio)
b) Realisation Account
c) Profit and Loss Account
d) Cash Account - The final settlement of partners’ capital accounts is done:
a) After preparing the Realisation Account
b) After paying all external liabilities
c) After settling all assets and liabilities of the firm
d) Before selling any assets - The order of payment upon dissolution, as per Section 48 of the Partnership Act, is:
I. Partners’ Loans
II. Partners’ Capital
III. Outside Debts
a) I, II, III
b) II, I, III
c) III, I, II (1. Outside Debts; 2. Partners’ Loans; 3. Partners’ Capital)
d) III, II, I - If a partner’s capital account shows a debit balance after all adjustments on dissolution, he is liable to pay:
a) The debit balance amount to the firm
b) Nothing
c) Only his share of loss
d) The amount equal to his initial capital - The journal entry for transferring an unrecorded liability paid on dissolution is:
a) Debit Realisation A/c; Credit Liability A/c
b) Debit Realisation A/c; Credit Cash A/c
c) Debit Partners’ Capital A/c; Credit Cash A/c
d) Debit Liability A/c; Credit Cash A/c - After transferring all assets and liabilities to the Realisation Account, the balance in this account represents:
a) Profit or Loss on Realisation
b) Total Capital
c) Total Liabilities
d) Net Assets - A partner’s loan to the firm is settled:
a) After settling outside liabilities but before settling partners’ capital
b) After settling outside liabilities but before settling partners’ capital
c) Before settling outside liabilities
d) Along with partners’ capital - If an asset is taken over by a partner during dissolution, the entry is:
a) Debit Partner’s Capital A/c; Credit Realisation A/c
b) Debit Realisation A/c; Credit Asset A/c
c) Debit Cash A/c; Credit Realisation A/c
d) Debit Partner’s Capital A/c; Credit Asset A/c - The realisation expenses paid by the firm are:
a) Debited to Partners’ Capital Accounts
b) Credited to Realisation Account
c) Debited to Realisation Account
d) Debited to Profit and Loss Account - Upon dissolution, the balance in the firm’s Bank Account is transferred to:
a) Partners’ Capital Accounts
b) Realisation Account
c) Profit and Loss Account
d) Cash Account
Answer Key:
- c
- c
- c
- c
- b
- b
- a
- a
- b
- b
- c
- c
- c
- c
- c
- d
- c
- c
- c
- b
- b
- b
- a
- c
- a
- b
- a
- b
- a
- b
- b
- b
- c
- d
- b
- b
- b
- b
- a
- a
- a
- c
- c
- a
- b
- a
- b
- a
- c
- b
Economics
“Government Budget and the Economy” (CBSE Class 12 Economics – Part A: Unit 4), strictly aligned with NCERT:
Factual Recall (15 Questions)
- What is the primary purpose of a government budget?
a) To increase foreign debt
b) To redistribute income and wealth
c) To regulate private sector prices
d) To reduce population growth
Answer: b) To redistribute income and wealth - Which component is NOT part of budget receipts?
a) Revenue receipts
b) Capital receipts
c) Primary deficit
d) Tax revenue
Answer: c) Primary deficit - Direct taxes include:
a) GST
b) Excise duty
c) Income tax
d) Sales tax
Answer: c) Income tax - Borrowings by the government fall under:
a) Revenue receipts
b) Capital receipts
c) Revenue expenditure
d) Capital expenditure
Answer: b) Capital receipts - Expenditure on building highways is classified as:
a) Revenue expenditure
b) Capital expenditure
c) Plan expenditure
d) Primary expenditure
Answer: b) Capital expenditure - Revenue deficit equals:
a) Total expenditure – Total receipts
b) Revenue expenditure – Revenue receipts
c) Fiscal deficit – Interest payments
d) Capital expenditure – Borrowings
Answer: b) Revenue expenditure – Revenue receipts - Which deficit indicates total borrowing requirements?
a) Revenue deficit
b) Fiscal deficit
c) Primary deficit
d) Budget deficit
Answer: b) Fiscal deficit - Primary deficit is calculated as:
a) Fiscal deficit – Interest payments
b) Revenue deficit – Interest payments
c) Fiscal deficit + Interest payments
d) Revenue deficit + Capital expenditure
Answer: a) Fiscal deficit – Interest payments - Interest payments by the government are part of:
a) Capital expenditure
b) Revenue expenditure
c) Capital receipts
d) Non-tax revenue
Answer: b) Revenue expenditure - Which is a non-tax revenue receipt?
a) Corporate tax
b) Excise duty
c) Dividends from public enterprises
d) Customs duty
Answer: c) Dividends from public enterprises - Disinvestment of PSUs is a:
a) Revenue receipt
b) Capital receipt
c) Revenue expenditure
d) Capital expenditure
Answer: b) Capital receipt - The financial year for the Government of India runs from:
a) January 1 to December 31
b) April 1 to March 31
c) July 1 to June 30
d) October 1 to September 30
Answer: b) April 1 to March 31 - Which objective aims to reduce income inequalities?
a) Economic stability
b) Reallocation of resources
c) Redistribution of income
d) Managing public enterprises
Answer: c) Redistribution of income - Recovery of loans by the government is a:
a) Revenue receipt
b) Capital receipt
c) Revenue expenditure
d) Plan expenditure
Answer: b) Capital receipt - Grants given to state governments are part of:
a) Revenue expenditure
b) Capital expenditure
c) Non-plan expenditure
d) Primary expenditure
Answer: a) Revenue expenditure
Conceptual Understanding (20 Questions)
- A high fiscal deficit indicates:
a) Surplus revenue receipts
b) Increased foreign reserves
c) Higher government borrowing
d) Reduced public debt
Answer: c) Higher government borrowing - Why is revenue deficit considered harmful?
a) It increases productive assets
b) It implies dissaving in the government sector
c) It reduces foreign exchange reserves
d) It lowers tax rates
Answer: b) It implies dissaving in the government sector - If primary deficit is zero, it means:
a) Fiscal deficit is zero
b) Government borrows only to pay interest
c) Revenue deficit equals fiscal deficit
d) No capital expenditure incurred
Answer: b) Government borrows only to pay interest - Subsidies to farmers aim to:
a) Increase tax revenue
b) Reallocate resources to priority sectors
c) Reduce capital expenditure
d) Promote imports
Answer: b) Reallocate resources to priority sectors - Which action reduces fiscal deficit?
a) Increasing subsidies
b) Raising corporate tax rates
c) Borrowing from RBI
d) Disinvesting PSUs
Answer: d) Disinvesting PSUs - A regressive tax structure implies:
a) Higher tax rates for the rich
b) Uniform tax rates for all
c) Higher tax burden on the poor
d) No indirect taxes
Answer: c) Higher tax burden on the poor - Capital expenditure differs from revenue expenditure because it:
a) Recurrs annually
b) Creates future liabilities
c) Creates long-term assets
d) Funds welfare schemes
Answer: c) Creates long-term assets - High fiscal deficit may lead to:
a) Reduced inflation
b) Lower interest rates
c) Inflationary pressure
d) Increased exports
Answer: c) Inflationary pressure - The “balanced budget multiplier” effect suggests:
a) Increased taxes reduce aggregate demand
b) Equal changes in taxes and spending boost output
c) Deficits always stimulate growth
d) Surpluses are inflationary
Answer: b) Equal changes in taxes and spending boost output - Which best describes ‘public goods’?
a) Rival and excludable
b) Non-rival and non-excludable
c) Produced only by the private sector
d) Subject to congestion
Answer: b) Non-rival and non-excludable - A government uses progressive taxation to:
a) Encourage luxury consumption
b) Reduce income inequality
c) Increase indirect taxes
d) Discourage savings
Answer: b) Reduce income inequality - Why is borrowing considered a capital receipt?
a) It increases current income
b) It creates future repayment liability
c) It funds revenue expenditure
d) It is tax-free
Answer: b) It creates future repayment liability - Primary deficit excludes interest payments to:
a) Measure current fiscal discipline
b) Inflate borrowing needs
c) Reduce debt burden
d) Encourage external borrowing
Answer: a) Measure current fiscal discipline - Which is an implication of revenue deficit?
a) Enhanced infrastructure
b) Reduced need for borrowing
c) Asset liquidation to fund expenses
d) Higher foreign direct investment
Answer: c) Asset liquidation to fund expenses - Inflationary gap can be corrected by:
a) Increasing government spending
b) Reducing taxes
c) Surplus budget policy
d) Expanding subsidies
Answer: c) Surplus budget policy - Fiscal policy primarily influences:
a) Exchange rates
b) Aggregate demand
c) Weather patterns
d) Technological innovation
Answer: b) Aggregate demand - A deficit budget during recession aims to:
a) Reduce aggregate demand
b) Stimulate economic activity
c) Increase interest rates
d) Promote imports
Answer: b) Stimulate economic activity - Which is a component of capital budget?
a) Interest payments
b) Salary of employees
c) Loan repayments
d) Construction of schools
Answer: d) Construction of schools - Value Added Tax (VAT) is a:
a) Direct tax
b) Indirect tax
c) Capital receipt
d) Non-tax revenue
Answer: b) Indirect tax - The FRBM Act (2003) aimed to ensure:
a) Higher fiscal deficits
b) Fiscal discipline and deficit reduction
c) Increased revenue expenditure
d) Abolition of direct taxes
Answer: b) Fiscal discipline and deficit reduction
Application-Based Reasoning (15 Questions)
- If revenue receipts = ₹800 cr, revenue expenditure = ₹1,200 cr, and capital expenditure = ₹500 cr, what is the revenue deficit?
a) ₹400 cr
b) ₹700 cr
c) ₹900 cr
d) ₹1,000 cr
Answer: a) ₹400 cr - Fiscal deficit = ₹10,000 cr, interest payments = ₹4,000 cr. Primary deficit is:
a) ₹14,000 cr
b) ₹10,000 cr
c) ₹6,000 cr
d) ₹4,000 cr
Answer: c) ₹6,000 cr - A government increases spending on healthcare without raising taxes. This will likely:
a) Reduce fiscal deficit
b) Increase fiscal deficit
c) Create revenue surplus
d) Lower public debt
Answer: b) Increase fiscal deficit - If India borrows from the IMF to fund infrastructure, it is classified as:
a) Revenue receipt
b) Tax revenue
c) Capital receipt
d) Revenue expenditure
Answer: c) Capital receipt - Revenue deficit = ₹50,000 cr, fiscal deficit = ₹75,000 cr. Capital expenditure is:
a) ₹25,000 cr
b) ₹50,000 cr
c) ₹75,000 cr
d) ₹1,25,000 cr
Answer: a) ₹25,000 cr
*Explanation: Fiscal Deficit = Revenue Deficit + (Capital Expenditure – Non-debt Capital Receipts). Assuming non-debt receipts=0, CE = FD – RD = ₹25,000 cr.* - To reduce income inequality, the government should:
a) Increase indirect taxes on essentials
b) Provide higher subsidies to luxury goods
c) Implement progressive taxation and welfare schemes
d) Abolish corporate taxes
Answer: c) Implement progressive taxation and welfare schemes - High fiscal deficit → Borrowing ↑ → Interest rates ↑ → Private investment ↓. This sequence describes:
a) Crowding-in effect
b) Crowding-out effect
c) Multiplier effect
d) Laffer curve
Answer: b) Crowding-out effect - If a government runs a surplus budget during inflation, it:
a) Aggravates inflation
b) Reduces aggregate demand
c) Increases employment
d) Encourages imports
Answer: b) Reduces aggregate demand - Interest payments = ₹5,000 cr; primary deficit = ₹2,000 cr. Fiscal deficit is:
a) ₹3,000 cr
b) ₹5,000 cr
c) ₹7,000 cr
d) ₹2,000 cr
Answer: c) ₹7,000 cr
Explanation: Fiscal Deficit = Primary Deficit + Interest Payments. - A government increases corporate tax and uses the proceeds to build roads. This action:
a) Increases revenue deficit
b) Is expansionary fiscal policy
c) Enhances infrastructure without increasing deficit
d) Reduces capital expenditure
Answer: c) Enhances infrastructure without increasing deficit - If disinvestment receipts = ₹30,000 cr and borrowings = ₹60,000 cr, total capital receipts are:
a) ₹30,000 cr
b) ₹60,000 cr
c) ₹90,000 cr
d) ₹1,20,000 cr
Answer: c) ₹90,000 cr - Revenue expenditure = ₹200 cr, capital expenditure = ₹150 cr, revenue receipts = ₹180 cr, capital receipts = ₹100 cr. Fiscal deficit is:
a) ₹70 cr
b) ₹120 cr
c) ₹50 cr
d) ₹20 cr
Answer: a) ₹70 cr
*Explanation: Fiscal Deficit = Total Expenditure (₹350 cr) – Total Receipts excluding Borrowings (₹280 cr).* - To control inflation, the government should adopt:
a) Deficit financing
b) Surplus budget
c) Higher capital expenditure
d) Increased subsidies
Answer: b) Surplus budget - Primary deficit is negative when:
a) Interest payments exceed fiscal deficit
b) Fiscal deficit is zero
c) Government has surplus for interest payments
d) Revenue deficit is positive
Answer: c) Government has surplus for interest payments - If GDP = ₹100 lakh cr, fiscal deficit = ₹7 lakh cr. The fiscal deficit as % of GDP is:
a) 5%
b) 7%
c) 10%
d) 14%
Answer: b) 7%
Answer Key
| Q No. | Answer | Q No. | Answer | Q No. | Answer |
|---|---|---|---|---|---|
| 1 | b | 18 | b | 35 | b |
| 2 | c | 19 | b | 36 | a |
| 3 | c | 20 | d | 37 | c |
| 4 | b | 21 | c | 38 | b |
| 5 | b | 22 | c | 39 | c |
| 6 | b | 23 | c | 40 | a |
| 7 | b | 24 | b | 41 | c |
| 8 | a | 25 | b | 42 | b |
| 9 | b | 26 | b | 43 | b |
| 10 | c | 27 | b | 44 | c |
| 11 | b | 28 | a | 45 | c |
| 12 | b | 29 | c | 46 | c |
| 13 | c | 30 | c | 47 | a |
| 14 | b | 31 | b | 48 | b |
| 15 | a | 32 | b | 49 | c |
| 16 | c | 33 | d | 50 | b |
| 17 | b | 34 | b |
Alignment with CBSE:
- Covers Chapter 5: Government Budget and Economy (NCERT Class 12 Macroeconomics).
- Follows 2024-25 syllabus: Budget objectives, receipts/expenditure classification, deficits (revenue/fiscal/primary).
- Question Types: Factual (30%), Conceptual (40%), Application (30%) as per CBSE patterns.
- Language: Simplified terminology (e.g., “dissaving,” “crowding-out”) with real-world examples (disinvestment, subsidies).