In the context of public finance, 'Tax Incidence' refers to: MCQ with Answer and Explanation

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In the context of public finance, 'Tax Incidence' refers to:

A. The final burden of the tax after shifting

B. The administrative cost of tax collection

C. The total tax revenue collected

D. The legal liability to pay the tax

Answer: Option A

Solution (By JKSSB Mock Tests)

Tax incidence refers to the final resting place of the tax burden — who ultimately bears the economic burden of the tax after possible shifting.

This question belongs to: Economy GK Economy Set 1

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Question #1

Public-Private Partnership refers to:

A. merger of public sector banks

B. nationalization of private firms

C. collaboration between government and private sector for infrastructure or service delivery

D. complete private ownership of public assets

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Correct Answer: Option C

Explanation:
PPP is a collaboration between government and private sector for infrastructure or public service delivery.

This question belongs to: Economy GK Economy Set 1

Question #2

The term 'Primary Deficit' indicates:

A. Revenue deficit excluding interest payments

B. Fiscal deficit including interest payments

C. Budgetary deficit only

D. Fiscal deficit excluding interest payments

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Correct Answer: Option D

Explanation:
Primary deficit = Fiscal deficit − Interest payments. It shows the borrowing requirement of the government excluding the interest burden of past debt.

This question belongs to: Economy GK Economy Set 1

Question #3

Which of the following is a characteristic of the 'Lucas Critique'?

A. Rational expectations are irrelevant for policy

B. Only adaptive expectations matter

C. Policy evaluation based on historical correlations remains valid under policy changes

D. Econometric models based on past data may fail when policy regimes change because agents alter their behaviour

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Correct Answer: Option D

Explanation:
The Lucas Critique argues that the parameters of traditional econometric models are not policy-invariant because economic agents change their behaviour when policy rules change.

This question belongs to: Economy GK Economy Set 1

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