The budgeting method under which the budget is prepared from the scratch is known as:
- A.Incremental budgeting
- B.Flexible budgeting
- C.Static budgeting
- D.Zero-Based Budgeting
Correct answer
Explanation
The correct answer is D, Zero-Based Budgeting. In zero based budgeting every item of expenditure starts from a zero base and has to be justified afresh for the coming period, instead of being carried over because it existed last year. Each activity is examined for whether it is needed at all, and only then for how much it should get, so wasteful schemes are cut out. The method was developed by Peter Pyhrr at Texas Instruments around 1970, and the Government of India adopted it for the expenditure of its ministries from the second half of the 1980s. Option A is wrong because incremental budgeting simply adds a margin to last year figures. Option B is wrong because a flexible budget is one that changes with the level of output or activity. Option C is wrong because a static budget is fixed for a single planned level of activity and is not revised. Exam tip: zero based budgeting starts from zero, Peter Pyhrr, adopted in India in the 1980s.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
Show answer
Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
Show answer
UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
Show answer
The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →