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

Tax elasticity measures the automatic response of tax revenue to changes in GDP:
A. without considering discretionary tax changes
B. after discretionary tax changes
C. considering only indirect taxes
D. considering only direct taxes
Answer: Option A
Solution (By JKSSB Mock Tests)
Tax elasticity measures the built-in response of tax revenue to GDP changes without discretionary changes.

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Practice More Economy Set 1 Questions

Question #1
In the context of public debt management, 'Debt Sustainability Analysis' typically examines:
A. Whether the projected path of the debt-to-GDP ratio remains stable or declines under plausible assumptions about growth, interest rates and primary balances
B. Only the maturity structure
C. Only the absolute level of debt
D. Only the currency composition

Correct Answer: Option A


Explanation:
Debt sustainability analysis assesses whether a country’s debt trajectory is consistent with intertemporal solvency, usually by examining the evolution of the debt-to-GDP ratio under baseline and stress scenarios.

This question belongs to: Economy GK Economy Set 1
Question #2
Which of the following is a characteristic of 'Overconfidence' as a behavioural bias?
A. Perfectly calibrated confidence intervals
B. The tendency of individuals to overestimate their own knowledge, abilities or the precision of their information
C. Only the absence of any self-assessment
D. The tendency to underestimate one’s own abilities

Correct Answer: Option B


Explanation:
Overconfidence manifests as excessive confidence in one’s own judgments, over-precision in probability estimates, or the better-than-average effect, and can lead to excessive trading and other suboptimal decisions.

This question belongs to: Economy GK Economy Set 1
Question #3
In the context of production functions, returns to scale refer to:
A. Change in output when all inputs are varied proportionately
B. Change in cost when output changes
C. Change in output when one input is varied
D. Change in price when supply changes

Correct Answer: Option A


Explanation:
Returns to scale examine how output changes when all inputs are increased by the same proportion. They can be increasing, constant or decreasing.

This question belongs to: Economy GK Economy Set 1