UPSC General Studies Solved Paper - General Studies-2016

  • question_answer
    There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the government to reduce the deficit?
    1. Reducing revenue expenditure
    2. Introducing new welfare schemes
    3. Rationalising subsidies
    4. Reducing import duty
    Select the correct answer using the codes given below

    A)  Only 1             

    B)  2 and 3

    C)  1, 2 and 3        

    D)         1, 2, 3 and 4

    Correct Answer: C

    Solution :

    Exp. [c] A deficit is the amount by which a sum falls short of some reference amount. In economics, a deficit is an excess of expenditures over revenue in a given time period; in more specific cases it may refer to: ? Balance of Payments (BOP) deficit, when the Balance of payments is negative. ? Government budget deficit that is deficit spending. ? Primary deficit -the pure deficit derived after deducting the interest payments and structural and cyclical deficit, parts of the public sector deficit. ? Income deficit (the difference between family income and the poverty threshold). ? Trade deficit (when the value of imports exceed the value of exports Introduction of new schemes would entail more spending and it goes just opposite to what we are trying to do, i.e. reduce deficit. Import duty is a tax collected on imports and some exports by the customs authorities of a country. It is usually based on the value of the goods that are imported. There are two distinct goals to import duties: to raise income for Local Government, and to give a market advantage to locally grown or produced goods that are not subject to import duties.

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