The Government: Budget and the Economy Test - 12

Tax is a revenue receipt as it neither creates a liability nor causes reduction in assets of the government.

In order to obtain a balanced budget, the government would like to increase its revenue by increasing taxes and by cutting expenditure. Both these actions will lead to less disposable income in the hands of the people. As a result consumption and aggregate demand will fall.

In case of deficit budget the government borrows frm RBI which in turn prints currency money . The increased supply of currency in the economy increases the aggregate demand and thus helps in combating recession.

Fiscal deficit is a situation when total expenditure of the government exceeds sum total of its revenue receipts and non debt capital receipts.  so , we can say that budgetary deficit is part of fiscal deficit.

Social welfare often suffers in market economies. Through its budgetary policies, the government makes sufficient provision for the supply of public goods, like law and order, defence, public administration . It also addresses environmental issues by offering subsidies on the use of cleaner energy like CNG, LPG, solar and wind energy.

Through its budgetary policies, the government aims to acheive a high rate of GDP . For this, the government makes investment expenditure on infrastructure including roads, dams, bridges and related projects. Higher investment leads to high economic growth.

The government focuses on the development of backward regions in the country.  In India, establishment of SEZ(Special Economic Zones) is an important step towards the development of backward regions.

Toll tax is to be paid by the person on whom it is imposed. So it is a direct tax.

Income tax is a direct tax as tax is imposed on the person whose income is being assessed. Whatever tax is imposed on the individual is to be paid by the individual himself/herself. The tax burden cannot be shifted to anyone else.

Toll tax has to be paid by the person on whom it is levied. It cant be shifted.