In the context of public finance, 'Tax Buoyancy' measures:
A. The responsiveness of tax revenue to changes in GDP without discretionary changes
B. The progressivity of the tax system only
C. The administrative cost of tax collection
D. The share of indirect taxes only
Answer: Option A
Solution (By JKSSB Mock Tests)
Tax buoyancy is the ratio of the percentage change in tax revenue to the percentage change in GDP, reflecting both automatic and discretionary changes in the tax system.
Explanation:
The money multiplier is the ratio of the stock of broad money (such as M3) to the stock of reserve money, reflecting the extent of credit creation by the banking system.
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