Which of the following statements correct defines the term ‘Off-Budget Debt’?
Correct Answer:
(B)
These are borrowings taken not by the Centre directly, but by another public institution on the direction of government.
Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
Ques:
32
The RBI categorizes budgetary expenditures of both Union and State governments into ‘developmental’ and ‘non-developmental’ expenditures. In this context, consider the following statements:
Developmental expenditures include interest payments, pensions, and subsidies.
Non-developmental expenditures encompass investments in social services.
Which of the statements given above is/are correct?
Correct Answer:
(D)
Neither 1 Nor 2
The RBI categorizes budgetary expenditures of both Union and State governments into ‘developmental’ and ‘non-developmental’ expenditures.
Developmental expenditures encompass investments in social services and economic sectors, while non-developmental expenditures include interest payments, pensions, and subsidies.
Ques:
33
Consider the following statements:
Article 293 covers borrowing by the Central Government.
Article 292 covers borrowing by State Governments.
Which of the statements given above is/are incorrect?
Correct Answer:
(C)
Both 1 and 2
Chapter II of Part XII of the Constitution of India deals with borrowing by the Central Government and State Governments.
It comprises two provisions:
Article 292 covers borrowing by the Central Government, and Article 293, covers borrowing by State Governments.
Article 293 (3) requires State Governments that are indebted to the Central Government to seek the consent of the Central Government before raising further borrowings.
Ques:
34
Which of the following best describes deficit financing?
Correct Answer:
(A)
When a government spends more than it earns, the difference being met through borrowing or printing new money.
Deficit financing occurs when a government's expenditure exceeds its revenue, and the shortfall is covered by borrowing or creating new money.
Ques:
35
What is monetisation of the government's fiscal deficit?
Correct Answer:
(B)
When the central bank (RBI) purchases government securities to finance the government's spending.
Monetization of the fiscal deficit occurs when the central bank purchases government securities from the government, effectively providing it with new money to finance its spending.
Ques:
36
Which of the following is a potential negative consequence of deficit financing?
Correct Answer:
(C)
Increased inflation.
Deficit financing can lead to increased inflation due to the increase in money supply in the economy.
Ques:
37
Which of the following is NOT a way to finance a budget deficit?
Correct Answer:
(D)
Decreasing government spending.
Decreasing government spending would actually reduce the budget deficit, not finance it.
Ques:
38
In India, who typically determines the level of deficit financing?
Correct Answer:
(B)
The Ministry of Finance.
The Ministry of Finance typically formulates the fiscal policy in India, which includes decisions related to deficit financing.