The chapter "Government Budget and the Economy" in CBSE Class 12 Business Studies provides a detailed understanding of the government's budget, its components, objectives, and the economic impact it has. This chapter is crucial for students to comprehend how government policies influence economic activities and overall economic stability.
Introduction to Introduction to CBSE Class 12 Business Studies Chapter "Government Budget and the Economy"
This chapter covers various key topics, including:
- Government Budget: An introduction to the government budget, explaining its meaning and significance. It includes the different types of budgets and their roles in the economy.
- Objectives of Government Budget: The primary objectives, such as promoting economic stability, reducing inequalities, managing public enterprises, and fostering economic growth.
- Public Goods: Explanation of public goods, their characteristics, and why they must be provided by the government. Public goods are non-excludable and non-rivalrous, making them essential for social welfare.
- Revenue Receipts: Detailed discussion on the different types of revenue receipts, including tax and non-tax revenue, and their importance in the budget.
- Capital Receipts: Understanding capital receipts, their sources such as borrowings and disinvestment, and their role in the budget.
Assignments for CBSE Class 12 Business Studies Chapter “Government Budget and the Economy”
- Short Questions:
- Define the term ‘Government Budget’.
- What are public goods and why must they be provided by the government?
- Differentiate between revenue receipts and capital receipts.
- Long Questions:
- Explain the various objectives of a government budget.
- Discuss the impact of a fiscal deficit on the economy.
- Describe the relationship between revenue deficit and fiscal deficit.
- Numerical Questions:
- Calculate the fiscal deficit given the total expenditure and total receipts excluding borrowings.
- Analyze the impact of an increase in government expenditure on equilibrium income using the multiplier effect.
- Case Study Analysis:
- Evaluate a real-life example of a government budget and discuss its components and economic impact.
- Research Project:
- Investigate the fiscal policy measures adopted by the government in a specific financial year and analyze their outcomes.
Conclusion
The chapter “Government Budget and the Economy” equips students with essential knowledge of how government budgets are structured and their economic implications. Understanding these concepts is crucial for analyzing government policies and their impact on economic stability and growth.
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Questions and Answers for CBSE Class 12 Business Studies Chapter "Government Budget and the Economy"
Q1: What is a government budget?
- ANS: A government budget is an annual financial statement presenting the government’s proposed revenues and spending for a financial year. It outlines the government’s fiscal policy and its impact on the economy.
Q2: What are public goods and why must they be provided by the government?
- ANS: Public goods are goods that are non-excludable and non-rivalrous, meaning they are available to all without direct payment. The government provides public goods to ensure social welfare and equitable access, as private markets may not supply them efficiently.
Q3: Differentiate between revenue receipts and capital receipts.
- ANS: Revenue receipts include the government’s income from taxes and non-tax sources, used for daily operations. Capital receipts include borrowings and disinvestment proceeds, used for creating assets or reducing liabilities.
Q4: Explain the various objectives of a government budget.
- ANS: Objectives include promoting economic stability, reducing income inequalities, managing public enterprises, encouraging economic growth, and ensuring optimal resource allocation.
Q5: Discuss the impact of a fiscal deficit on the economy.
- ANS: A fiscal deficit indicates the government is spending more than its revenue, leading to borrowing. While it can stimulate economic growth through increased public expenditure, excessive deficits can lead to higher debt and inflationary pressures.
Q6: Describe the relationship between revenue deficit and fiscal deficit.
- ANS: Revenue deficit occurs when revenue expenditure exceeds revenue receipts, while fiscal deficit represents the total shortfall in the government’s finances. An increase in revenue deficit directly contributes to a higher fiscal deficit.
Q7: How can the government reduce the budget deficit?
- ANS: The government can reduce the budget deficit by decreasing expenditure through planned activities, encouraging private sector involvement, and increasing revenue by raising taxes or divesting public sector units.
Q8: Are fiscal deficits inflationary?
- ANS: Fiscal deficits can be inflationary if they lead to increased aggregate demand without a corresponding increase in supply, causing prices to rise. However, if there is underutilized capacity in the economy, a fiscal deficit may not result in inflation.
Q9: Explain the relationship between government deficit and government debt.
- ANS: Government deficits occur when expenditures exceed revenues, leading to borrowing. Continuous deficits increase government debt, as the government borrows to cover shortfalls, leading to higher interest obligations and potential future financial burdens.
Q10: Discuss the issue of deficit reduction.
- ANS: Deficit reduction can be achieved by decreasing government expenditure through efficient planning and private sector participation, and increasing revenue through higher taxes and divestment of public sector undertakings.
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