The diagram that shows the mone y received and paid out by each sector of the
economy is the
Detailed Answer
C
2
A government’s attempt to reduce its defence expenditure is an example of (i) , while a
government effort to raise interest rates is an example of (ii) .
(i) (ii)
Detailed Answer
B
3
According to the Laffer curve, as tax rates increase, tax revenues
Detailed Answer
D
4
The government imposes a new income tax legislation under which every male taxpayer must pay
15% of his income as taxes, while every female taxpayer must pay 20% of her income as taxes. Such tax
legislation violates which equity principle?
Detailed Answer
A
5
A 15% VAT is a(n):
Detailed Answer
C
6
Tax incidence is the
7
You know that all taxes are distortionary. Under what conditions will this knowledge lead you to
oppose the imposition of every single tax in the economy?
Detailed Answer
A
8
The automatic stabilisation function of fiscal policy ensures that government expenditures
______(i)______ and government revenues _____(ii)_____ during recessions.
Detailed Answer
C
9
Let us say assume the Pakistani government is facing a fiscal deficit. Which of the following
would not constitute a possible method of financing this deficit?
Detailed Answer
B
10
Which of the following is not a correct argument against a fiscal policy expansion – say a tax
cut – aimed at lifting aggregate demand?