Consider the following statements 1 The primary objective of a government budget is to maximize prof...........

Indian Economy (CDS) Budgeting and Fiscal policy

Consider the following statements:

1. The primary objective of a government budget is to maximize profits for the government.

2. Fiscal deficit is the difference between the government’s total expenditure and its total receipts, excluding borrowing

3. A budget surplus indicates that the government has borrowed heavily to finance its operations.

Which of the statements given above are correct?

1 only

2 only

1 and 3 only

1, 2 and 3

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Explanation:

Statement 1 is incorrect: The objective of the government is not to maximize profit but the government budget plays a major role in the allocation functions of public goods, redistribution of resources, stabilization of the economy, promotion of economy, debt management, etc. Statement 2 is correct: The fiscal deficit is the difference between total revenue and total expenditure by the government. It indicates the extent to which the government needs to borrow to finance its operations. Gross fiscal deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts) Statement 3 is incorrect: A budget surplus occurs when total revenue exceeds total expenditure, which means the government does not need to borrow to finance its operations. In this case, tax collection exceeds the required expenditure.