Tax buoyancy measures the responsiveness of: MCQ with Answer and Explanation

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Tax buoyancy measures the responsiveness of:

A. tax revenue to changes in GDP without discretionary changes

B. tax revenue to changes in GDP including discretionary changes

C. expenditure to revenue

D. imports to exports

Answer: Option B

Solution (By JKSSB Mock Tests)

Tax buoyancy includes both automatic and discretionary changes in tax revenue relative to GDP growth.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'Ricardo equivalence' proposition states that:

A. taxes have no effect

B. deficit-financed spending does not affect aggregate demand if households anticipate future taxes

C. government borrowing is always expansionary

D. government spending is always contractionary

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Correct Answer: Option B

Explanation:
Ricardian equivalence argues that public borrowing is offset by higher private saving in anticipation of future taxes.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'accelerator coefficient' is the ratio of:

A. investment to output

B. investment to consumption

C. change in investment to change in output

D. saving to investment

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Correct Answer: Option C

Explanation:
The accelerator is the ratio of induced investment to a change in output.

This question belongs to: Economy GK Economy Set 1

Question #3

The 'net investment' is equal to gross investment minus:

A. savings

B. depreciation

C. consumption

D. taxes

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Correct Answer: Option B

Explanation:
Net investment = gross investment - depreciation.

This question belongs to: Economy GK Economy Set 1

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