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# NCERT solutions for Class 12 Economics - Introductory Macroeconomics chapter 5 - Government Budget And The Economy [Latest edition]

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#### Chapters ## Chapter 5: Government Budget And The Economy

Exercise

#### NCERT solutions for Class 12 Economics - Introductory Macroeconomics Chapter 5 Government Budget And The Economy Exercise [Pages 83 - 84]

Exercise | Q 1 | Page 83

Explain why public goods must be provided by the government.

Exercise | Q 2 | Page 83

Distinguish between revenue expenditure and capital expenditure.

Exercise | Q 3 | Page 83

‘The fiscal deficit gives the borrowing requirement of the government’. Elucidate.

Exercise | Q 4 | Page 83

Give the relationship between the revenue deficit and the fiscal deficit.

Exercise | Q 5 | Page 83

Suppose that for a particular economy, investment is equal to 200, government purchases are 150, net taxes (that is lump-sum taxes minus transfers) is 100 and consumption is given by C = 100 + 0.75Y (a) What is the level of equilibrium income? (b) Calculate the value of the government expenditure multiplier and the tax multiplier. (c) If government expenditure increases by 200, find the change in equilibrium income.

Exercise | Q 6 | Page 84

Consider an economy described by the following functions:- C = 20 + 0.80Y, I = 30, G = 50, TR = 100 (a) Find the equilibrium level of income and the autonomous expenditure multiplier in the model. (b) If government expenditure increases by 30, what is the impact on equilibrium income? (c) If a lump-sum tax of 30 is added to pay for the increase in government purchases, how will equilibrium income change?

Exercise | Q 7 | Page 84

Consider an economy described by the following functions:- C = 20 + 0.80Y, I = 30, G = 50, TR = 100, calculate the effect on output of a 10 per cent increase in transfers, and a 10 per cent increase in lump-sum taxes. Compare the effects of the two.

Exercise | Q 8 | Page 84

We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium Income? Does the government have a balanced budget?

Exercise | Q 9 | Page 84

Suppose marginal propensity to consume is 0.75 and there is a 20 per cent proportional income tax. Find the change in equilibrium income for the following (a) Government purchases increase by 20 (b) Transfers decrease by 20.

Exercise | Q 10 | Page 84

Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

Exercise | Q 11 | Page 84

Explain the relation between government deficit and government debt.

Exercise | Q 12 | Page 84

Does public debt impose a burden? Explain.

Exercise | Q 13 | Page 84

Are fiscal deficits inflationary?

Exercise | Q 14 | Page 84

Discuss the issue of deficit reduction.

Exercise | Q 15 | Page 84

What do you understand by G.S.T? How good is the system of G.S.T as compared to the old tax system? State its categories.

## Chapter 5: Government Budget And The Economy

Exercise ## NCERT solutions for Class 12 Economics - Introductory Macroeconomics chapter 5 - Government Budget And The Economy

NCERT solutions for Class 12 Economics - Introductory Macroeconomics chapter 5 (Government Budget And The Economy) include all questions with solution and detail explanation. This will clear students doubts about any question and improve application skills while preparing for board exams. The detailed, step-by-step solutions will help you understand the concepts better and clear your confusions, if any. Shaalaa.com has the CBSE Class 12 Economics - Introductory Macroeconomics solutions in a manner that help students grasp basic concepts better and faster.

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Concepts covered in Class 12 Economics - Introductory Macroeconomics chapter 5 Government Budget And The Economy are Meaning of Government Budget, Objectives of Government Budget, Components of Budget, Classification of Receipts, Classification of Expenditure, Types of Budget, Types of Budget - Budget Deficit, Measures of Government Deficit Or Surpluses, Direct and Indirect Tax, Government Budget - Allocation of Resources, Deficit Budget - Primary Deficit, Meaning of Disinvestment.

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