I. Fill in the blanks:
1. The government manages the public finance through ______________.
Answer: fiscal policy
2. In the budget, when the government’s revenue is more than its expenditure, it is called ____
Answer: Surplus Budget
3. The person who presents the Central Government Budget in the Lok Sabha is ____________
Answer: Finance Minister of India
4. The revenue generated by the government through internal and external loans is __
Answer: Capital receipts.
5. GST Stands for ______________.
Answer: Goods and Service Tax
II. Answer the following in one sentence each:
6. What is Public Finance?
Answer: The finance of the government is called Public Finance.
7. What do you mean by Budget?
Answer: The statement of estimated income and expenditure of a year prepared by the government is called Budget.
8. Give the meaning of Deficit Budget.
Answer: If the expenditure is more than the income, it is called Deficit budget.
9. What are Direct Taxes?
Answer: When the tax is paid by an individual on whom it is imposed, it is called Direct Tax. Personal Income Tax, Corporate Tax, Wealth Tax, Stamp Duty etc. are the Direct taxes.
10. Express fiscal deficit in the form of a formula.
Answer: In the budget, if the government’s expenditure is more than its revenue receipts and non-debt capital receipts, it is called fiscal deficit. Formula: Fiscal deficit = (Revenue receipts + Non-debt Capital Receipts) – Total Expenditure
III. Answer the following in five-six sentences each:
11. Explain the differences between personal finance and public finance.
Answer: The differences between Personal finance and Public finance are as follows.
| Personal or Private Finance | Public Finance |
| Pe1. Personal or private finance relates income and expenditure of one person or one family. | 1. Public finance relates to the income and expenditure of the government. |
| 2. In Private finance, individuals calculate their income before hand and then spend it accordingly. | 2. In public finance, the government calculates its expenditure first and then adjusts its income accordingly. |
| 3 – Personal financial transactions are kept confidential. | 3. Public financial matters are discussed in the legislative houses. |
| 4. When an individual or a family saves money, it will supplement their prosperity. | 4) When the government saves money, growth is stunted. Hence governments always try to show more expenditure on developmental works. |
12. Explain briefly the significance/importance of public finance.
Answer: The significance of public finance is,
A government, with an intention to establish economic progress and financial stability, announces the fiscal policy related to its income, expenditure and debt.
1) The government manages public finance according to fiscal policy.
2) Public finance is managed keeping in mind the progress of the nation.
3) The government, through its fiscal policies, formulates methods to equitably distribute the country’s natural wealth, labour and capital investment, and tries to maximize the production.
4) The government tries to ensure the equitable distribution of the income generated amids all sections of the people, and tries to see that all people live comfortably.
5) Nation’s progress can be achieved by achieving the welfare of the people.
6) The government, policies, enhances the public expenditure in priority areas like agriculture, small scale industries and basic infrastructure.
7) The government takes steps to ensure a balanced growth in all spheres of the economy.
8) Developing countries like India utilize public finance in order to eradicate poverty and unemployment to regulate financial upheavals and commodity prices.
9) To establish financial stability Government uses financial policy as a weapon.
13. List the plan expenditure of the Central Government.
Answer: Under the Central Planned Expenditure, the government spends money on three types of services and development. They are:
1. Financial services – Agriculture and agriculture-related activities, industry, communication, fuel, science and technology, rural development etc.
2. Social services – Education, health, hygiene, family welfare, drinking water supply, housing, social welfare etc.
3. General services – The expenditure incurred on maintenance of peace, law and order.
14. Explain the aspects of non-tax revenue of the Central government.
Answer: Apart from taxes, the government generates revenue from other sources. This is called Non-tax revenue. The main types of Non-tax revenue are as follows.
1. The net profit earned by the Reserve Bank of India.
2. The net profit generated by the Indian Railways.
3. The revenue generated by the Departments of Post and Telecommunications.
4. The revenue generated by the Public Sector Industries.
5. The revenue generated by the Coins and Mints.
6. Various types of fees and penalties etc.
15. What is fiscal deficit? Mention the four kinds of fiscal deficit.
Answer: In the budget, if the government’s expenditure is more than its revenue receipts and non-debt capital receipts, it is called fiscal deficit.
Four kinds of fiscal deficit: Fiscal deficit, Budget Deficit, Revenue Deficit and Primary Deficit are the four kinds of fiscal deficit. They are calculated as follows.
Fiscal deficit = (Revenue receipts + Non-debt Capital Receipts) – Total Expenditure
Budget Deficit = Total Revenue – Total Expenditure
Revenue Deficit = Revenue receipt – Revenue Expenditure
Primary Deficit = Fiscal Deficit – Interest Payment
Some more important Questions and answers:
- What are the three types of Budget?
Answer: Surplus Budget, Deficit Budget and Balanced Budget are the three types of Budget. If the budget shows excess income as compared to expenditure, it is called Surplus budget. If the expenditure is more than the income, it is called Deficit budget. If both income and expenditure are the same, it is called Balanced budget.
2. What is Public expenditure? Mention the two types of Public expenditure.
Answer: The government spends money for various purposes like defence, administration, economic development and welfare of the people. This is called Public Expenditure. Revenue expenditure and the Capital Expenditure are the two types of Public expenditure.
3. What is Revenue expenditure? Write the types of revenue expenditure.
Answer: The expenditure incurred by the Central government from the sources of revenue income is called Revenue Expenditure. Planned Expenditure and Non-planned Expenditure are the two types of revenue expenditure.
4. What is the Planned expenditure? What are the three services under the Planned expenditure?
Answer: The expenditure incurred by the government towards financial and social services, nation-building exercises and developmental works is called Planned Expenditure. Under the Central Planned Expenditure, there are three types of services and development. They are,
1. Financial services – Agriculture and agriculture-related activities, industry, communication, fuel, science and technology, rural development etc.
2. Social services – Education, health, hygiene, family welfare, drinking water supply, housing, social welfare etc.
3. General services – The expenditure incurred on maintenance of peace, law and order.
5. What is the Non-Planned expenditure? What are they?
Answer: With the exception of developmental activities, expenditure incurred on administration, defence, interest payment and other heads is called Non-planned expenditure. The major heads of non-plan expenditure are civil administration, defence, interest payment, allocations to states and various subsides etc.
6. What are Capital Expenditure?
Answer: The money spent by the government on agriculture, industry, transport, electricity, irrigation projects and other developmental activities along with creation of new assets is called Capital Expenditure.
7. What is Public revenue?
Answer: The government collects income from varied sources to meet its expenditure. This is called Public Revenue.
8. What is Revenue receipts ? Write the two types of the revenue receipts.
Answer: The income generated by the government through taxes and non-tax sources is called Revenue Receipts. This is the actual revenue of the government. Revenue Receipts are of two types: 1.Tax revenue 2.Non-tax revenue.
9. What is Tax? What are the two types of taxes?
Answer: The money paid by the citizens without any expectation in return is called Tax. The two types of taxes are,
Direct Taxes: When the tax is paid by an individual on whom it is imposed, it is called Direct Tax.
Indirect Taxes: If the burden of tax imposed by the government is transferable to others, it is called Indirect Tax.
10. What is Capital receipts? Why this was generated?
Answer: The revenue generated by the government which is intended to be used to create new assets in various fields of the economy, is called Capital Receipts. This revenue is generated to meet the expenses required for the development of agriculture, industries, irrigation, electricity, basic amenities etc.
