Tax elasticity measures the automatic response of tax revenue to changes in GDP: MCQ with Answer and Explanation

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Tax elasticity measures the automatic response of tax revenue to changes in GDP:

A. considering only direct taxes

B. considering only indirect taxes

C. without considering discretionary tax changes

D. after discretionary tax changes

Answer: Option C

Solution (By JKSSB Mock Tests)

Tax elasticity measures the built-in response of tax revenue to GDP changes without discretionary changes.

This question belongs to: Economy GK Economy Set 1

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Question #1

In the context of monetary economics, the 'Money Multiplier' is:

A. The ratio of investment to saving

B. The ratio of exports to imports

C. The ratio of fiscal deficit to GDP

D. The ratio of broad money to reserve money

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Correct Answer: Option D

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.

This question belongs to: Economy GK Economy Set 1

Question #2

The term 'core inflation' was coined because it excludes items with:

A. high price volatility such as food and fuel

B. high import content

C. high tax rates

D. high weight in CPI

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Correct Answer: Option A

Explanation:
Core inflation excludes volatile food and fuel prices to reveal underlying inflation.

This question belongs to: Economy GK Economy Set 1

Question #3

The 'Fiscal Responsibility and Budget Management Act' initially aimed to reduce fiscal deficit to what percentage of GDP by 2008-09?

A. 6%

B. 3%

C. 5%

D. 2%

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Correct Answer: Option B

Explanation:
The FRBM Act initially aimed to reduce fiscal deficit to 3% of GDP by 2008-09.

This question belongs to: Economy GK Economy Set 1

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