Short Answer TypeGiving reason, explain how the following should be treated in estimating national income:
Expenditure on fertilizers by a farmer.
Giving reason, explain how the following should be treated in estimating national income:
Purchase of tractor by a farmer
Explain ‘Revenue Deficit’ in a Government budget? What does it indicate?
Revenue deficit is the gap between the consumption expenditure (revenue expenditure) of the Government and its current revenues (revenue receipts). It also indicates the extent to which the government has borrowed to finance the current expenditure. Revenue receipts consist of tax revenues and non-tax revenues. Tax revenues comprise proceeds of taxes and other duties levied. The expenditure incurred for normal running of government functionaries, which otherwise does not result in the creation of assets is called revenue expenditure.
Revenue Deficit = Revenue Expenditure - Revenue Receipts
Indications of Revenue Deficit:
The revenue deficit indicates the following points.
i. It reflects the government fiscal policy.
ii. It indicates the need for government’s borrowings to finance its consumption expenditures and revenue expenditures such as payments to government employees, etc.
iii. Revenue deficit implies unsoundness of the financial system of an economy.
An increase in revenue deficit implies a proportional increase in the fiscal deficit.
Long Answer Type| S.No. | Items | (Rs crores) |
| (i) | Factor income from abroad | 15 |
| (ii) | Private final consumption expenditure | 600 |
| (iii) | Consumption of fixed captial | 50 |
| (iv) | Government final consumption expenditure | 200 |
| (v) | Net current transfers to abroad | (-)5 |
| (vi) | Net domestic fixed capital formation | 110 |
| (vii) | Net factor income to abroad | 10 |
| (viii) | Net imports | (-)20 |
| (ix) | Net indirect tax | 70 |
| (x) | Change in stocks | (-)10 |
Explain the concept of ‘excess demand’ in macroeconomics. Also explain the role of ‘open market operation’ in correcting it.
Explain the concept of ‘deficient demand’ in macroeconomics. Also explain the role of Bank Rate in correcting it.
Explain the distinction between autonomous and accommodating transactions in balance of payments. Also explain the concept of balance of payments deficit in this context.
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