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number of ways. Taxes are the most interesting because Governments use it as a medium for
part of any budget. Taxes determine the fate implementing economic policies in the country.
of businesses and individuals. The level of Budgetary actions of the Government affect
disposable income of the taxpayers depends on production, size and distribution of income and
the tax rates presented in the budget. Government utilization of human and material resources of
expenditure on various heads such as defence, the country.
administration, infrastructure, education and Thus, the scope and importance of public
health care etc. affects the lives of the citizens finance in a modern economy has undergone an
and overall economy. Also, budget is important immense change since last 100 years.

EXERCISE

Q. 1. A) Choose the correct option : c) Fees
1) Optional functions of Government : d) Special Levy

a) Protection from external attack Options : 1) b and c 2) a and c
b) Provision of education and health services 3) a, b, c and d 4) c and d
c) Provision of social security measures 5) Trends shown by Public expenditure of any
d) Collection of tax Government shows following trend.
Options : 1) b and c 2) a, b and c a) Constant b) Increasing
3) b, c and d 4) All of the above c) Decreasing d) Fluctuating

2) Obligatory functions of the Government : Options : 1) only a 2) only b
a) Provision of employment 3) only c 4) only d
b) Maintaining internal law and order
6) Identify the right group of pairs from the given
c) Welfare measures options.
d) Exporting goods and services i) Direct tax a) Non-tax revenue

Options : 1) c and d 2) a and b ii) Indirect tax b) Inflation
3) only b 4) a, c and d iii) Fees and Fines c) GST
3) "Definition - Public finance is one of those iv) Surplus budget d) Personal income tax
subjects which are on the borderline between
Options : a) i-d ii-c iii-b iv-a
economics and politics." ......... given by
b) i-c ii-d iii-a iv-b
a) Adam Smith
c) i-d ii-c iii-a iv-b
b) Alfred Marshall
d) i-a ii-b iii-c iv-d
c) Prof. Hugh Dalton
Q. 2. Distingwish between following concepts :
d) Prof. Findlay Shirras
1) Public finance and Private finance.
Options : 1) only a 2) only b
2) Internal debt and External debt.
3) only c 4) only d
3) Developmental expenditure and Non-
4) Non-tax sources of revenue : developmental expenditure.
a) Direct and Indirect Tax 4) Special assessment and Special levy.
b) Direct Tax and Fees 5) Direct Tax and Indirect tax.

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