PRC-3 · Chapter 16 · Question 17 of 20
When a government's planned public expenditures for the financial year significantly exceed the total revenue it expects to collect from taxes, it must borrow money. This situation is a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Budget deficit
Explanation
A budget deficit exists when government outflows (spending) are greater than inflows (tax revenue), leading to national borrowing.
More Public Finance MCQs
- Q19Which canon of taxation dictates that a tax should cost the government very little to administer and collect relative to the revenue it…
- Q20A tax structure states: First Rs. 4,000 earned is tax-free; Rs. 4001-20,000 is taxed at 20%; Above Rs. 20,000 is taxed at 40%. This…
- Q1The government implements an income tax system where individuals earning Rs. 50,000 pay 5% tax, those earning Rs. 200,000 pay 15% tax, and…
- Q2A consumer buys a television at an electronics store. The price includes a 17% General Sales Tax (GST) that the store collects and…
- Q3During a severe economic downturn, the Ministry of Finance decides to heavily slash income taxes and drastically increase government…