Fiscal Deficit: Concepts and Economic Impact Quiz

Question 1

How is Fiscal Deficit defined?

Accepted Answer

The difference between total government expenditure and total government revenue

Answer

The difference between total government income and total assets

Answer

The difference between government exports and imports

Answer

The difference between government debt and interest payments

Question 2

Fiscal Deficit is an important indicator of the economic health of which country's economy?

Accepted Answer

Any country's economy

Answer

Only developed countries' economy

Answer

Only Asian countries' economy

Answer

Only developing countries' economy

Question 3

What problem does the government face when Fiscal Deficit increases?

Accepted Answer

Need to borrow more and increase in public debt

Answer

Increase in exports

Answer

Decrease in imports

Answer

Reduction in the number of government employees

Question 4

What should the government do to reduce Fiscal Deficit?

Accepted Answer

Increase revenue and control expenditure

Answer

Only eliminate taxes

Answer

Only increase expenditure

Answer

Only increase imports

Question 5

What is the difference between Fiscal Deficit and Revenue Deficit?

Accepted Answer

Fiscal Deficit is the difference between total expenditure and revenue; Revenue Deficit relates only to current expenditure

Answer

Revenue Deficit is more important

Answer

They are the same thing

Answer

Fiscal Deficit is related only to debt

Question 6

In India, Fiscal Deficit is presented in which budget document?

Accepted Answer

Union Budget

Answer

State Budget

Answer

Only in RBI reports

Answer

Only in World Bank reports

Question 7

Why is Fiscal Deficit expressed as a percentage of GDP?

Accepted Answer

To compare deficit relative to the size of the economy

Answer

Because it is the only way

Answer

Only by government order

Answer

To make GDP appear smaller

Question 8

How does high Fiscal Deficit affect inflation?

Accepted Answer

Can increase inflation

Answer

Decreases inflation

Answer

Has no effect on inflation

Answer

Completely eliminates inflation

Question 9

What effect does Fiscal Deficit have on interest rates?

Accepted Answer

Can increase interest rates

Answer

Has no effect on interest rates

Answer

Decreases interest rates

Answer

Are determined only by RBI

Question 10

Why is it important to control Fiscal Deficit?

Accepted Answer

To control public debt, inflation, interest rates and maintain economic stability

Answer

Only to increase government income

Answer

Only to increase expenditure

Answer

Only to eliminate taxes

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