Q20 of 31 Page 1

Which of the following statement is true?

i) Loans from IMF is a Revenue Receipt.


ii) Higher revenue deficit necessarily leads to a higher fiscal deficit.


iii) Borrowing by a government represents a situation of fiscal deficit.


iv) Revenue deficit is the excess of capital receipts over the revenue receipts.

Borrowing by a government represents a situation of fiscal deficit.


Explanation.


The fiscal deficit is the difference between the total expenditure of the government and the revenue receipt plus those capital receipts which are not in the nature of borrowings but which finally accrue to the government. The fiscal deficit can also be considered as budgetary deficit plus borrowing and other liabilities. A fiscal deficit indicates the amount of borrowing the government has to repay.


Fiscal Deficit = Revenue receipt + Capital Receipt – Total Expenditure.


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18

The flow of Goods and services and factors of production across different sectors in a barter economy is known as:

i) Circular flow


ii) Real flow


iii) Monetary Flow


iv) Capital Flow

 19

The government budget of a hypothetical economy presents the following information, which of the following value represents Budgetary Deficit. (all fig. in crores)

A. Revenue Expenditure = 25,000


B. Capital Receipts = 30,000


C. Capital Expenditure = 35,000


D. Revenue Receipts = 20,000


E. Interest Payments = 10,000


F. Borrowings = 20,000


i) 12,000


ii) 10,000


iii) 20,000


iv) None of the above.

 21

Devaluation and Depreciation of currency are one and the same thing’. Do you agree? How do they affect the exports of a country?

 22

If in an economy saving function is given by S = (-) 50 + 0.2 Y and Y = 2000 crores; consumption expenditure for the economy would be 1,650 crores and the autonomous investment is 50 crores and the marginal propensity to consume is 0.8. True or False? Justify your answer with proper calculations.

OR


“Economists are generally concerned about the rising Marginal Propensity to Save (MPS) in an economy”. Explain why?