Government Budget and the EconomyClass 12 Introductory Macroeconomics Assertion & Reason Questions

Assertion (A): The government must provide public goods such as national defence and roads.

Reason (R): Public goods are non-excludable and non-rivalrous, which leads to the free-rider problem, making it unprofitable for the private sector to supply them.

Assertion (A): The sale of shares in a Public Sector Undertaking (PSU) is treated as a capital receipt.

Reason (R): This transaction creates a new liability for the government, which must be repaid in the future.

Assertion (A): A proportional income tax system acts as an automatic stabilizer for the economy.

Reason (R): Discretionary fiscal policy refers to deliberate government actions, like changing tax laws, to manage the economy.