In the context of public economics, 'Pigouvian Taxes' are designed to:
A. Internalise negative externalities by setting the tax equal to marginal external cost
B. Subsidise positive externalities only
C. Raise revenue without affecting behaviour
D. Only redistribute income
Answer: Option A
Solution (By JKSSB Mock Tests)
A Pigouvian tax is levied on an activity that generates a negative externality and is set equal to the marginal external damage at the socially optimal quantity, thereby aligning private and social costs.
Explanation:
Velocity of money measures how frequently the average unit of currency is spent on final goods and services during a given time period; it appears in the equation of exchange.
Explanation:
Developing economies often exhibit dualism — coexistence of a modern industrial sector and a traditional agricultural sector with low productivity.
Explanation:
Seigniorage is the purchasing power that the government obtains by issuing base money; it equals the real value of the increase in base money.
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