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GOVERNMENT BUDGET
Class 12 - Economics
Time Allowed: 2 hours Maximum Marks: 75

1. Read the text carefully and answer the questions: [6]

Read the following case:
Budget 2021 -22 → From Where The Rupee Comes?

S.No. Items Amount (Paisa/Rupee)

(i) Corporation Tax 13

(ii) Income Tax 14

(iii) Customs 3

(iv) Union Excise Duties 8

(v) Goods and Service Tax 15

(vi) Non-tax Revenue 6

(vii) Non-debt Capital Receipts 5

(viii) Borrowing and other liabilities 36

(a) What is the percentage share of total tax revenue in governments total receipts?

a) 45% b) 50%

c) 53% d) 59%
(b) Identify which of the following is not an example of non-tax revenue?
i. Fees And Fines
ii. Income Tax
iii. Borrowings
iv. Grants

a) Only (ii) b) (i) and (iv)

c) (ii), (iii) and (iv) d) (ii) and (iii)

(c) If government borrowing increases, which of the following statements will be incorrect for the current
fiscal year?

a) Primary deficit will increase. b) Fiscal deficit will increase.

c) Revenue deficit will decrease. d) Government burden for future payment

will increase.
(d) Which among the following is an example of indirect tax?

a) Corporation Tax b) Gift Tax

c) Income Tax d) Excise Duties

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 (e) If government borrowing for the fiscal year is 35,000 crores and interest payments are 5,000 crores then
the value of fiscal deficit will be

a) 7,000 crores b) 35,000 crores

c) 30,000 crores d) 40,000 crores

(f) Match the items of Column I with Column II and choose the correct pair:

Column I Column II

(a) Revenue Receipt (i) Interest paid

(b) Capital Receipt (ii) Grants received

(c) Revenue Expenditure (iii) Profits of PSU

(d) Capital Expenditure (iv) Loan repaid

a) (c) - (iii) b) (a) - (i)

c) (d) - (iv) d) (b) - (ii)

Question No. 2 to 7 are based on the given text. Read the text carefully and answer the questions: [6]

S.No. Items Budget Expenditure 2020-21 (percentage of GDP)

(i) Revenue Receipts 20.21

(ii) Gross Tax Receipts 24.23

(iii) Net Tax Receipts 16.36

(iv) Non-Tax Receipts 3.85

(v) Non-debt Capital Receipts 2.25

(vi) Non-debt Receipts 22.46

(vii) Total Expenditure 30.42

(viii) Revenue Expenditure 26.30

(ix) Capital Expenditure 4.12

2. Identify the value of fiscal deficit:

a) 6.09 b) 7.96

c) 4.12 d) 3.85
3. If primary deficit is 0.88, the value of interest payment would be ________.

a) 3.85 b) 7.96

c) 7.08 d) 4.12
4. Revenue deficit in the government budget is:

a) Revenue Expenditure - Revenue Receipts b) Fiscal deficit + Interest Payments

c) Total Expenditure - Total Receipts d) Total Receipts - Total Expenditure

5. Which of the following is a non-tax receipt?

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 a) Gift Tax b) Excise duty

c) Sales Tax d) Dividend

6. Expenditure on old-age pensions is an example of ________ expenditure.

a) capital b) debt creating

c) revenue d) asset creation

7. ________ is/are debt creating capital receipts for the Government.

a) Borrowings from World Bank b) Partial sale of government shares in a

company.

c) Recovery of loans from State government d) Sale of Public Sector Undertakings

Question No. 8 to 13 are based on the given text. Read the text carefully and answer the questions: [6]
Budget receipts refer to estimated money receipts of the government from all sources during the fiscal year. Broadly,
the budget receipts are classified as (1) Revenue Receipts, and (2) Capital Receipts. Revenue Receipts are those money
receipts of the government which show the following two characteristics: (i) These receipts do not create any
corresponding liability for the government. Example: Tax receipts. Tax is a revenue receipt because it does not involve
any corresponding liability for the government. Tax is a unilateral compulsory payment to the government. (ii) These
receipts do not cause any reduction in assets of the government. Example: Tax receipts do not lead to any reduction in
assets of the government. In contrast, if the government receives money by selling its share of some company, it causes
a reduction in assets of the government. These are, therefore, not to be treated as revenue receipts. In short, revenue
receipts of the government are those money receipts that do not create a liability for the government and as well do not
lead to a reduction in assets of the government.
8. Which of the following are capital receipts of the government?

a) Borrowings b) Disinvestment

c) All of these d) Recovery of loans

9. On the ________ side, the budgetary policy reveals expected receipts of the government.

a) debit b) revenue

c) credit d) expenditure
10. ________ receipts impact asset-liability status of the government.

a) revenue b) regular

c) capital d) current
11. ________ receipts adds to liability of the government.

a) capital b) revenue

c) fiscal d) current
12. Why is tax considered a revenue receipt?

a) It causes a reduction in the assets b) It does not cause any reduction in the assets

c) It involves a corresponding liability d) It does not involve any corresponding

liability
13. Fill the blank space.

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 a) Non-Direct Taxes b) Non-tax Revenue

c) Non-plan tax Revenue d) Direct Taxes

Question No. 14 to 19 are based on the given text. Read the text carefully and answer the questions: [6]
Budget expenditure is also classified as plan and non-plan expenditure.
In India, non-plan expenditure is a significant part of the total government expenditure. This is why fiscal discipline in
the country often remains a serious challenge.
(1) Plan Expenditure: Plan expenditure refers to that expenditure that relates to (i) specified plans and programs of
development, and (ii) assistance of the central government to the state governments. It includes both revenue
expenditure (like assistance to the states) and capital expenditure (like expenditure on the construction of roads,
bridges, and hospitals). (2) Non-plan Expenditure: Broadly, all expenditure other than plan expenditure is classified as
non-plan expenditure. Specifically, nonplan expenditure relates to expenditure on the routine functioning of the
government.
As a matter of convention, all grants given by the center to the state governments (and the governments of Union
territories) are treated as revenue expenditure, even when some grants may result in the creation of assets.

14. A balanced budget ________ the solution to the problem of unemployment.

a) offers b) admits

c) does not offers d) does not admits

15. Expenditure on law and order is a component of ________ expenditure.

a) non-plan b) non-development

c) development d) plan
16. ________ expenditure contributes to social welfare.

a) plan b) non-development

c) non-plan d) development
17. Total government expenditure =

a) All of these b) Development expenditure + non

development expenditure

c) Revenue expenditure + capital expenditure d) Plan expenditure+ non-plan expenditure

18. A budget is called to be a balanced one when the ________ of the government ________ to the ________ it collects.

a) revenue; equals; expenditure b) revenue; exceeds; expenditure

c) expenditure; exceeds; revenue d) expenditure; equals; revenue

19. What will a government do to keep the budget balanced if it incurs a higher expenditure?

a) It will have to raise the taxes b) It will have to raise the prices of the

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 commodities

c) It will have to increase the indirect taxes d) It will have to rope in other revenue-
generating plans

Question No. 20 to 25 are based on the given text. Read the text carefully and answer the questions: [6]
Budget 2021-22: From Where The Rupee Comes?

S.No. Content ₹ (in crores)

1. Revenue Expenditure 100

2. Capital Receipts 40

3. Net Borrowings 38

4. Net Interest Payments 27

5. Tax Revenue 50

6. Non-Tax Revenue 15

20. What is the revenue deficit?

a) ₹ 30 cr b) ₹ 35 cr

c) ₹ 50 cr d) ₹ 45 cr
21. Which of the following shows fiscal deficit?

a) ₹ 50 cr b) ₹ 38 cr

c) ₹ 40 cr d) ₹ 45 cr
22. What will be the primary deficit?

a) ₹ 11 cr b) ₹ 17 cr

c) ₹ 20 cr d) ₹ 23 cr
23. Which of the following is a non-tax revenue for the government?

a) return on assets b) service tax

c) excise duties d) customs

24. Which of the following is the formula for revenue deficit?

a) revenue expenditure-revenue receipts b) borrowings-revenue receipts

c) revenue expenditure-non tax revenue d) revenue receipts-interest payments

25. Which of the following is MOST LIKELY to be the main contributor to the fiscal deficit in this case?

a) high revenue expenditure b) high tax revenue

c) high capital receipts d) low interest payments

26. Read the text carefully and answer the questions: [5]
The Finance Minister Nirmala Sitharaman has proposed a sharp 34.5 per cent hike in capital expenditure to ₹
5.54 lakh crore in financial year 2022 in order to push growth. The massive increase comes at a time when the
country is looking to recover from the Covid pandemic, as rising government spending is key to bringing the
economy back on track.

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 The government will also provide an additional ₹ 2 lakh crore to states for capital expenditure over and above its
own commitment. "We will also work out specific mechanism to nudge states to spend more of their Budget on
creation of infrastructure,” Ms Sitharaman said.
The finance minister said that the government will launch a national asset monetisation pipeline which includes
the sale of oil and gas pipelines, power transmission lines and operation of toll roads under the National
Highway Authority of India.
This year's budget, according to the government, rests on six pillars: health and well-being, physical and
financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital,
innovation and research and development, and "minimum government, maximum governance," the finance
minister had asserted. And capital expenditure is an important component that drives the growth.
- “Budget 2021: Finance Minister Proposes Sharp 34.5% Hike in Capital Expenditure.”- NDTV Budget 2021 -
February 01, 2021
(a) Why has the Finance ministry hiked the Capital Expenditure?

a) Neither To recover from the Covid-19 b) To bring the economy back on track
pandemic nor To bring the economy
back on track

c) To recover from the Covid-19 pandemic d) To recover from the Covid-19 pandemic
and To bring the economy back on track
(b) ________ is an important component that drives the growth.

a) Capital Expenditure b) Capital Receipts

c) Revenue Expenditure d) Revenue Receipts

(c) Which objective of the Government Budget does the increase in capital expenditure serve?

a) Encouragement of economic growth b) All of these

c) Stability in the economy d) Generation of employment

(d) What problem can the increase in this Capital Expenditure create?

a) Fiscal Deficit b) Primary Deficit

c) Revenue Deficit d) Budgetary Deficit

(e) Which one of the following is not a capital expenditure.

a) Loans by the Central government to b) Purchase of shares

state governments

c) Loans by the Central government to the d) Sale of shares

state corporations

Question No. 27 to 31 are based on the given text. Read the text carefully and answer the questions: [5]
Prime Minister Narendra Modi’s second budget in seven months disappointed investors who were hoping for big-bang
stimulus to revive growth in Asia’s third-largest economy. The fiscal plan delivered by Finance Minister Nirmala
Sitharaman proposed tax reductions for individuals and wider deficit targets, but failed to provide specific steps to fix a
struggling financial sector, improve infrastructure and create jobs. Stocks slumped, reflecting the subdued sentiment.
“Far from being a game changer, the budget provides little in terms of short-term growth stimulus," said Priyanka
Kishore, head of India and South-East Asia economics at Oxford Economics Ltd. in Singapore. “While income tax cuts

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will provide some relief on the consumption front, the multiplier effect is low and the overall stance of the budget is not
expansionary."
The focus now shifts to the Reserve Bank of India’s interest rate decision on February 6, 2020. However, having
already cut interest rates five times last year and with inflation exceeding 7 percent, well above the central bank’s
target, there’s limited scope for Governor Shaktikanta Das to ease more.
27. A direct tax cut in government budget helps to stimulate economic growth by

a) Both increasing production activity b) increasing disposable income

and increasing demand

c) increasing production activity d) increasing demand

28. Decreasing tax is a fiscal measure to deal with situation in an economy.

a) Reducing Inequality b) Reallocation

c) Neither reducing Inequality nor reallocation d) Both reducing Inequality and reallocation
29. What will be the impact on the overall money supply if government reduces income tax slabs?

a) It depends upon the behaviour of the b) There will be no impact on the money
targeted population. supply.

c) There will be more money supply in the d) There will be less money supply in the
economy. economy.
30. Assertion (A): A tax cut need not always leads to increase in economic growth in the economy.
Reason (R): Inequality in distribution of income leads to uneven growth impacts.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

31. Choose the correct statement from below
a. A tax cut in the economy widens fiscal deficit.
b. Fiscal deficit increases the burden of taxes on future generation.
c. Higher-income groups should be taxed at a progressive rate.
d. All of the above statements are correct.

a) Option (d) b) Option (b)

c) Option (c) d) Option (a)

Question No. 32 to 36 are based on the given text. Read the text carefully and answer the questions: [5]
A budget deficit refers to a situation when budget expenditures of the government are greater than the budget receipts.
Or, it is the excess of total expenditure (revenue expenditure and capital expenditure) over and above the total receipts
(revenue receipts and capital receipts) of the government. Budget Deficit = Total expenditure (Revenue expenditure +
Capital expenditure - Total receipts (Revenue receipts + Capital receipts) BD = BE - BR, when BE > BR (Here, BD =
Budget deficit; BE = Budget expenditure; BR= Budget receipts.)
Types and Measurement With reference to the budget of the Government of India, there are three important types of the
budget deficit. These are: (1) Revenue Deficit, (2) Fiscal Deficit, and (3) Primary Deficit. (1) Revenue Deficit: Revenue
deficit is the excess of revenue expenditure over revenue receipts. Revenue Deficit = Revenue expenditure - Revenue
receipts (RD = RE - RR), when RE > RR (Here, RD = Revenue deficit; RE = Revenue expenditure; RR = Revenue

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receipts.) Implications (i) Because of revenue deficit, the government may have to cut its expenditure on several
welfare programmes in the country. This leads to the loss of social welfare. (ii) The government may have to raise
funds through borrowing. This raises the liabilities of the government and lowers its creditworthiness. (iii) The
government may be compelled to disinvestment-selling its ownership of public enterprises. Three Ways of Managing
Revenue Deficit (i) Borrowing from the general public, RBI, or the rest of the world. (ii) Disinvestment by way of
selling its ownership (shares) of public enterprises. (iii) Cut in expenditure (subsidies in particular) (2) Fiscal Deficit is
the excess of total expenditure over total receipts (other than borrowings). Fiscal Deficit = Total expenditure (Revenue
expenditure + Capital expenditure) - Total receipts other than borrowings (Revenue receipts + Capital receipts other
than borrowings) FD = BE - BR other than borrowings, when BE > BR other than borrowings (Here, FD = Fiscal
deficit; BE = Budget expenditure; BR= Budget receipts.) In fact, the fiscal deficit is the estimation of total borrowings
by the government. It is often called Gross Fiscal Deficit. Gross Fiscal Deficit = (i) Borrowing from RBI + (ii)
Borrowing from abroad + (iii) Net borrowing at home.
32. In which of the following ways, can deficit in the budget be financed?

a) Borrowing from the public b) Both borrowing from RBI and borrowing
from the public

c) Borrowing from RBI d) Reinvestment

33. If the primary deficit is ₹ 3,500 and interest payment is ₹ 500, fiscal deficit is ________.

a) 3,000 b) 3,500

c) 4,000 d) 4,500
34. Deficit budget is also called ________.

a) revenue budget b) capital budget

c) government budget d) non-government budget

35. ________ deficit reflects the need for borrowings by the government to manage its budgetary expenditure.

a) primary b) fiscal

c) capital d) revenue
36. If we are to judge the financial health of the public sector and the stability of an economy. What will be the key variable?

a) Gross Primary Deficit b) The Fiscal Policy

c) Gross Fiscal Deficit d) Revenue Deficit

Question No. 37 to 41 are based on the given text. Read the text carefully and answer the questions: [5]
MUMBAI: Investors were relieved as the finance minister Nirmala Sitharaman avoided an increase in the long-term
capital gains tax on equity investments and securities transaction tax in the Union Budget for 2021-22 announced today.
Heading into the Budget, most investors were concerned that the government may look at increasing the long-term
capital gains tax or the securities transaction tax in order to boost its revenues, especially as the stock market has
witnessed a breakneck rally since the beginning of April.
In her Budget speech in July 2019, the finance minister had reintroduced the long-term capital gains tax after 15 years.
Currently, individuals who make capital gains of more than ₹ 1 lakh on their equity investment after a holding period of
more than one year have to pay a tax of 10 per cent on the capital gains. However, the capital gains tax for individuals
in the highest bracket of earnings comes around 15 per cent inclusive of a cess.
Money managers had said that the government needed to bring out an equity friendly budget, implying no changes in

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taxations related to the stock market, in order to ensure that its divestment plans went smoothly in the next fiscal year.
-"Budget 2D21: Investors breathe a sigh of relief as FM skips LTCG, STT hike" - The Economic Times - February 1st,
2021
37. What type of tax is the Capital Gains Tax?

a) It is a cess b) Indirect Tax

c) Direct Tax d) It is a fine

38. What is the reason for the government to increase taxes?

a) To achieve the objective of equality in b) To use the money for themselves

income distribution

c) To get their salary d) To extract money from the people

39. Why didn't the government say anything about the capitals gain tax?

a) To help the economy for economic growth b) All of these

c) To stabilize the economic growth d) To rectify the losses that happened due to
Covid-19
40. The capital gains come in the highest bracket of earning comes around ________.

a) 30% b) 10%

c) 15% d) 20%
41. Capital gain tax is applicable on ____________.

a) Capital Assets b) Capital Receipts

c) Business stock d) Income of person

Question No. 42 to 46 are based on the given text. Read the text carefully and answer the questions: [5]
NEW DELHI: Finance Minister Nirmala Sitharaman on Monday announced plans to sell stake in LIC as part of her
disinvestment plans for FY22. In her Budget speech, the FM said her government will complete divestment of BPCL,
CONCOR and SCI in FY22. She said that her government will privatise two public sector banks (PSBs) and one
general insurance company as well.
"LIC IPO may see light of day soon," said Jiger Saiya, Partner and Leader - Tax & Regulatory Services at BDO India.
Earlier, in an interview with ET, LIC Chairman M R Kumar had said the IPO is very much likely. “The point is that it is
going to be big and we want to get the valuations right,” he had said adding that the listing of an insurance company
requires determining the embedded value of the business.
LIC has started the process and would soon announce the software, which will assist it determine the right valuation.
“We have floated an RFP for the actuarial firm that will undertake the exercise. This calculation will take some time.
Once this process is done, we will be ready," Kumar said on January 11.
Last week, a Reuters report quoting sources suggested that the government was looking to sell 10-15 per cent in the
country's biggest insurer to improve public finances.
To facilitate the sale of the LIC stake, the government will need Parliament approval to amend the LIC Act.
As part of its divestment drive, four CPSEs - HAL, SAIL, Bharat Dynamics and IRCTC -have come out with offers for
sale (OFSes) this financial year. They garnered ₹ 12,907 crore to the exchequer. In addition, IPOs of IRFC and
Mazagon Dock Shipbuilders together fetched ₹ 1,984 crore.
Also this year, the government sold shares worth about ₹ 1,837 crore in private companies, in which it holds stakes

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through SUUTI.
Four state-owned companies, NTPC, RITES, NMDC and KIOCL, completed share buybacks, adding ₹ 2,769 crore to
the exchequer.
The government is also looking to sell its entire 26.12 per cent stake in Tata Communications (TCL), erstwhile VSNL,
through an OFS and strategic sale this financial year. The process of privatisation of Air India, BPCL, Pawan Hans,
BEML, Shipping Corp, Neelachal Ispat Nigam and Ferro Scrap Nigam (FSNL) is currently under way.
-"Budget: LIC IPO coming; 2 PSU banks, 1 insurer to be sold" - The Economic Times - February 02, 2021.
42. The government will privatise _________ Public Sector Banks.

a) Two b) Four

c) Three d) One
43. What is the main reason for this disinvestment?

a) To earn revenue b) To reduce the fiscal defict

c) To revive the economy d) To create monopoly of industrialists

44. According to Reuters, why is the government looking to sell country's insurer?

a) To reduce revenue deficit b) To improve public finances

c) To reduce fiscal defict d) To get money from other than taxes.

45. What other thing can the government do to improve the deficit with respect to the Covid situation?

a) Raising government revenue b) Lowering government expenditure

c) Borrowing from public d) None of these

46. The Government is selling its ownership of public enterprises.This will lead to-

a) Economic control of foreigners may b) Ownership of public enterprises may be lost

increase in domestic economy to foreign companies

c) The government makes revenue out of it d) Stability in the process of growth

47. Identify the tax whose burden can be shifted [1]

a) All of these b) VAT

c) GST d) Sales tax

48. The receipt which does not create liability for the government is termed as: [1]

a) Interest Receipt b) Capital Receipt

c) Both Capital Receipt and Revenue Receipt d) Revenue Receipt

49. Which of the following is not an indirect tax? [1]

a) Corporate tax b) Sales tax

c) Excise duty d) Value added tax

50. Dividends received from public sector undertakings (PSUs) are a part of the government's ________. [1]

a) Capital expenditure b) Tax receipts

c) Non-tax revenue receipts d) Capital receipts

51. ________ deficit includes interest payment by the government on the past loans. [1]

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 a) Capital b) Both revenue and capital

c) Revenue d) Neither revenue nor capital

52. Public expenditure can be unplanned only [1]

a) Insufficient information b) True

c) Can’t say d) False

53. If the budgetary deficit of the government is ₹ 25,000 crores and the borrowings and other liabilities are ₹ 7,000 [1]
crores, how much will be the fiscal deficit?

a) ₹ 18,000 crores b) ₹ 25,000 crores

c) ₹ 7,000 crores d) ₹ 32,000 crores

54. Union Budget is the budget of: [1]

a) Election Commission b) State Government

c) Central Government d) Local Government

55. The government decides to give budgetary incentives to investors for making investments in backward regions. [1]
Which objective of government budget is being pursued by the government?

a) Economic growth b) Allocation of resources

c) Reduction in income inequalities d) Price stability

56. Why gift tax is considered as a paper tax? [1]

a) Both it yields very low revenue and it is a b) It is a direct tax

direct tax

c) It is an indirect tax d) It yields very low revenue

57. Assertion (A): It is for the future generations to repay loans as well as the mounting interest thereon. [1]
Reason (R): Lesser borrowing, greater the bottleneck and hurdles for the future generation to plan for their
growth and development.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

58. Assertion (A): Repayment of loan is a capital expenditure. [1]
Reason (R): Because it leads to reduction in liabilities.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

59. Assertion (A): Scholarships are treated as capital expenditures. [1]
Reason (R): Capital expenditures either create an asset or reduce liability.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

60. Assertion (A): A shopkeeper pays sales tax to the government. [1]

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 Reason (R): The burden of sales tax cannot be shifted to others.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

61. Assertion (A): Primary Deficit is the root cause of Fiscal Deficit. [1]
Reason (R): High Primary Deficit indicates that interest commitments (on earlier loans) have forced the
government to borrow

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

62. Statement 1: Revenue receipts neither create any liability nor cause any reduction in the assets of the [1]
government.
Statement 2: There is a future obligation to return the amount in case of revenue receipts.

a) Statement 1 is true and Statement 2 is false. b) Both the Statements are true.

c) Both the Statements are false. d) Statement 2 is true and Statement 1 is false.
63. Statement I: Public goods are those goods and services that are collectively consumed by the public. [1]
Statement II: Public goods are excludable and rivalrous in nature.

a) Both the statements are false. b) Statement II is False and Statement I is true.

c) Both the statements are true. d) Statement I is true and Statement II is false.
64. Statement 1: The impact and incidence of direct taxes is on the same person. [1]
Statement 2: Direct taxes are generally proportional in nature.

a) Statement 1 is true and Statement 2 is false. b) Both the Statements are true.

c) Statement 2 is true and Statement 1 is false. d) Both the Statements are false.
65. Statement I: Public goods are non-excludable. [1]
Statement II: Consumption of public goods by people is of rivalous nature.

a) Statement II is false and statement I is true. b) Statement I is true and statement II is false.

c) Both the statements are true. d) Both the statements are false.
66. Statement I: Budgetary incentives (tax concessions, subsidies, etc.) can be used to influence allocation of [1]
resources in the country.
Statement II: Reallocation of Resources objective is sought to be achieved through progressive income
taxation, in which higher the income, higher is the tax rate.

a) Statement I is true and statement II is false. b) Statement II is true and statement I is false.

c) Both the statements are false. d) Both the statements are true.

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