The Government: Budget and the Economy Test - 7

Government revenue is classified as revenue receipts and capital receipts. Capital receipts are further classified as i) recovery of loans, ii) borrowings and other liabilities, iii) other receipts. Capital receipts either create a liability or cause a reduction in the assets of the government.

Revenue expenditure refers to estimated expenditure of the government in a fiscal year which does not create any assets or cause a reduction in the liabilities. The other component is capital expenditure 

Capital expenditure is one of the components of the budget expenditure. It refers to the estimated expenditure of the government in a fiscal year which creates assets or causes a reduction in the liabilities.

Tax receipts is a major revenue for the government. Tax receipts can be income tax, Goods and services tax, gift tax, wealth tax etc. Tax is a compulsory payment to the government by the households, firms or other institutional units. 

A direct tax is a tax, the final burden of which is borne by the person on whom it is imposed. For eg. income tax is a direct tax.

the proportion of total additional planned savings to total additional income

the fraction of total additional income that is used for consumption

The major source of revenue receipts fo the government is tax receipts.

An indirect tax is one, the final burdent of which can be shifted to other persons, For eg. GST .GST is imposed on the traders but they charge this tax from the buyers . The tax is added to the price of the goods and services being sold.

Through its budgetary policies, the governemnt tries to reduce the inequalities in income and wealth. They can impose taxes on the rich and give subsidies to the poor so that income is redistributed among the poorer sections of the society.