20 Most VSAQ’s of Theories of Employment and Public Finance Chapter in Inter 1st Year Economics (TS/AP)

2 Marks

VSAQ-1 : What do you mean by full employment? (OR) Full Employment.

Full employment is a situation in which all willing and able individuals in an economy who are actively seeking employment have jobs. It is a state where the labor market is in equilibrium, and the unemployment rate is at its natural or structural rate, which includes only frictional and voluntary unemployment. In full employment, the economy is operating at its maximum potential, and there is no cyclical or involuntary unemployment.

VSAQ-2 : What is effective demand? (OR) Effective Demand.

Effective demand is the level of demand that results in full employment of available resources and production without inflation or deflation, representing the equilibrium where aggregate demand equals aggregate supply.

VSAQ-3 : What do you mean by wage cut policy? What is “Wage cut policy”? (OR) Wage-cut policy.

Wage-cut policy, proposed by economist A.C. Pigou, suggests that reducing wages can help alleviate unemployment by making it more attractive for employers to hire workers. This policy advocates for decreasing labor wages to create employment opportunities for the unemployed.

VSAQ-4 : Define public finance.

Public finance is the study and management of government revenue, expenditure, and financial activities. It involves the analysis of how governments raise funds (through taxes, borrowing, etc.) and how they allocate and spend those funds to meet public needs and objectives.

VSAQ-5 : Differentiate tax revenue and non-tax revenue.

  1. Tax Revenue is income derived from taxation, including taxes like income tax and sales tax, and is a stable and mandatory source of government income.
  2. Non-Tax Revenue comprises income from sources other than taxation, such as fees, grants, and interest income, and can be irregular and voluntary.

VSAQ-6 : What is public debt?

Public debt is incurred when the government borrows funds due to a situation where its expenditure exceeds its revenue.

VSAQ-7 : What are the debt redemption methods?

Methods for debt redemption include:

  1. Surplus Budget: Using surplus funds.
  2. Refunding: Replacing with lower-rate debt.
  3. Annuities: Regular fixed payments.
  4. Sinking Fund: Accumulated repayments.
  5. Conversion: Changing debt terms.
  6. Additional Taxation: Extra taxes.
  7. Capital Levy: One-time wealth tax.
  8. Trade Surplus: Using exports’ excess.

VSAQ-8 : What is budget? (OR) Budget.

A budget is an annual financial plan that outlines an organization’s estimated income and expenses for a specific period, usually a fiscal year. It serves as a financial roadmap, assisting individuals, businesses, or governments in allocating resources and making informed financial decisions. Budgets are crucial for effective financial management and achieving financial goals.

VSAQ-9 : Distinguish between revenue account and capital account.

  1. Revenue Account deals with short-term, day-to-day government income and expenses, primarily for running the government. Transactions are short-term and do not create assets or reduce liabilities. Examples include salaries, subsidies, and interest payments.
  2. Capital Account covers long-term investments and asset creation, such as infrastructure development. It involves long-term activities that may reduce liabilities and create assets. Examples encompass new infrastructure and military equipment acquisition.

VSAQ-10 : What are the exclusive powers of union government?

The Union government holds exclusive powers in specific domains:

  1. Foreign Affairs: Management of international relations, treaties, and diplomacy.
  2. Defense: Oversight of the armed forces and national security.
  3. Atomic Energy: Control over atomic energy and related policy.
  4. Currency: Authority to regulate and issue currency and coinage.

VSAQ-11 : What is fiscal deficit? (OR) Fiscal deficit.

Fiscal deficit is the difference between the total revenue and total expenditure of the government. It represents the amount of money the government needs to borrow to meet its expenses when its expenditures exceed its revenues in a given fiscal year.

VSAQ-12 : Write note on deficit budget. (OR) What is the meaning of ‘Deficit Budget’? (OR) Deficit budget.

A deficit budget occurs when government spending exceeds its revenue during a specific fiscal period.

VSAQ-13 : Central Bank (RBI). (OR) Reserve Bank of India.

The Reserve Bank of India (RBI) is the apex financial institution tasked with the oversight and regulation of the country’s financial system.

VSAQ-14 : Laissez-faire economy. (OR) Laissez-faire.

Laissez-faire refers to the belief that economies and businesses operate most effectively with minimal government intervention. It is a foundational principle of free-market capitalism.

VSAQ-15 : What are the components of a budget?

A budget typically consists of the following components:

  1. Budget Receipts:
    • Revenue Receipts
    • Capital Receipts
  2. Budget Expenditure

VSAQ-16 : Write a brief about GST.

GST, introduced in India in July 2017, is a unified indirect tax system featuring multiple tax rates (5%, 12%, 18%, and 28%). It replaced numerous central and state taxes, streamlining tax collection and administration. GST allows businesses to claim input tax credit, minimizing tax evasion and fostering a more conducive environment for conducting business. This comprehensive tax regime encompasses both goods and services, simplifies filing through online processes, and seeks to establish a unified market throughout the country.

VSAQ-17 : Mention the functions of Finance Commission.

The Finance Commission in India:

  1. Divides tax revenues fairly.
  2. Recommends grants to states.
  3. Evaluates fiscal positions.
  4. Suggests resource mobilization.
  5. Manages debts.
  6. Promotes financial discipline.
  7. Provides other financial recommendations.

VSAQ-18 : What is meant by primary deficit?

Primary deficit is the difference between the fiscal deficit and interest payments in a government’s budget. It signifies the deficit in government finances, excluding the expenses related to servicing the debt, such as interest payments. In essence, it measures the shortfall in government revenue to cover all expenditures except the interest on outstanding loans. This indicator is crucial for evaluating a government’s financial management and the sustainability of its fiscal policies.

VSAQ-19 : What is meant by public expenditure?

Public expenditure refers to the government’s spending on a wide range of economic activities and programs. It encompasses all the financial outlays made by the government, including those directed towards infrastructure development, social welfare programs, defense, education, healthcare, and more. Public expenditure serves as a pivotal tool for governments to achieve their economic and social objectives. It has the potential to stimulate economic growth, reduce inequality, and enhance the overall well-being of citizens. However, it must be managed efficiently to ensure that resources are allocated effectively and that it does not lead to fiscal imbalances.

VSAQ-20 : What is Say’s law of markets? (OR) Say’s law of markets.

Say’s Law, by Jean-Baptiste Say, states “supply creates its own demand.” It suggests that producing goods and services generates income, leading to demand for other goods. This idea implies markets naturally balance but is debated in economics.