In the context of public finance, 'Tax Buoyancy' measures:
A. The administrative cost of tax collection
B. The responsiveness of tax revenue to changes in GDP without discretionary changes
C. The progressivity of the tax system only
D. The share of indirect taxes only
Answer: Option B
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 paradox of thrift argues that if everyone tries to save more during a recession, aggregate demand falls, leading to lower income and ultimately lower total saving.
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