Government Budget and the Economy Test - 5

Yes. Public expendiute can be both Plan and Non plan expenditure. The expenditure relating to specific plans and programmes of developemnt is plan expenditure and non plan expenditure is not related to any specific plan or programme. Expenditure on defence and subsidies , salaries and pensions are example of non plan expenditure.

any expenditure by the govt that creates assets for the govt is a capital expenditure For eg. Expenditure on land and building, expenditure on machinery and equipment, purchase of shares etc.

When the govt repays its loans, it reduces the liability of the govt. So, repayment of loan is a capital expenditure.

Future generations inherit a laggard economy where GDP growth is low because a significant percentage of national income is used to pay the past debts.

Revenue expenditure is incurred in the normal functioning of the government. Revenue expenditure is recurring in nature. Its purpose is to keep the government machinery running. It does not create any asset.

Public expenditure is classified as capital and revenue expenditure. Revenue expenditure does not create assests or cause reduction in liabilities whereas capital expenditure leads to creation of assets or reduction in liabilities.

Plan expenditure refers to that expenditure which relates to specific plans and programmes of development whereas non plan expenditure refers to the expenditure which is not related to any specified plans and prgrammes.
Eg of planned expenditure - construction of flyover, hospital etc.
Eg. of non planned expenditure - Expenditure on defence, salaries, pensions etc.

Public expenditure can be developmental as well as non developmental expenditure.

Fiscal deficit reflects the total borrowings of the government during the financial year. Accumulated borrowings over the year reflect accumulated burden of national debt which is to be borne by the future generations.

Public expenditure can also be planned expenditure which refers to the expenditure which relates to the specific plans and programmes of development by the government , like construction of hospital, construction of roads, flyovers etc.

Unbalanced budget is one when estimated revenues are not equal to the estimated expenditures. It may be a deficit or surplus budget. When estimated expenditure is greater than estimated revenues, it is a deficit budget and when estimated revenues are greater than estimated expenditure, then it is a surplus budget.

it is equal to the excess of total expenditure over the sum of revenue receipts and capital receipts excluding borrowings. It actually reflects the total borrowings of the govt during the financial year.

A budget can be a balanced budget, deficit budget or a surplus budget.

Any expenditure by the govt which does not create any assets for them is a revenue expenditure. For eg. Wage bill of the govt, interest payments, defence purchases etc.

Public expenditure can be planned as well as non plan expenditure. Plan expenditure refers to the expenditure which is directly related to the economic and social development of the country whereas non plan expenditure refers to the expenditure which is not directly related to the economic and social development of the country.

Borrowing from RBI increases money supply in the economy. Increase in money supply leads to increase in general price level and over a period of time it leads to a inflationary spiral.

Fiscal deficit is an estimate of borrowing by the government. Greater fiscal deficit implies greater borrowings by the government . Borrowing from RBI is often linked to inflationay spiral in the economy.

A balanced budget means a budget in which estimated government receipts and estimated government expenditure are equal., i.e. taxes are equal to government spending.

surplus budget means a budget where the budgeted receipts > budgeted expenditure .

Revenue expenditure is incurred in the normal functioning of the government like interest payments, wage bill of the govt, defence purchases, expenditure on subsidies etc.

Fiscal deficit indicates the excess of government expenditure over receipts except borrowings. For eg. if total expenditure = Rs 100 crores and total receipts = Rs. 100 crores(including borrowing of Rs. 20 crores)
then fiscal deficit = 100 - (100 -20) = 20
so, we see that fiscal deficit = borrowings.

The borrowings by the govt creates liability . So borrowing by the govt comes under capital receipts.

Public expenditure can be development as well as non developmntal expenditure. Development expenditure refers to the expenditure which is directly related to the economic and social development of the country. whereas non developmental expenditure refers to the expenditure which is not directly related to economic and social developemnt of the country but related to essential general services of the government.

Transfer payment is a revenue expenditure since it neither creates any assets for the govt nor reduces any liability.

Deficit budget is a budget in which the government revenues raised by the government falls short of the government expenditure .
Deficit budget = estimated government revenue < estimated government expenditure