The concept of 'Horizontal Equity' in taxation requires that: MCQ with Answer and Explanation

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The concept of 'Horizontal Equity' in taxation requires that:

A. Only vertical equity matters

B. Individuals with higher ability to pay should pay proportionally more

C. Individuals with the same ability to pay should pay the same tax

D. Taxes should be independent of ability to pay

Answer: Option C

Solution (By JKSSB Mock Tests)

Horizontal equity is the principle that taxpayers with equal capacity to pay (usually measured by income or wealth) should bear equal tax burdens.

This question belongs to: Economy GK Economy Set 1

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Question #1

The 'National Social Assistance Programme' provides social assistance to:

A. elderly, widows and disabled persons in need

B. government employees

C. all citizens

D. children only

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Correct Answer: Option A

Explanation:
NSAP provides social assistance to elderly, widows and persons with disabilities.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a characteristic of the 'Life-Cycle Hypothesis' of consumption?

A. Consumption depends only on current income

B. Only permanent income matters and age is irrelevant

C. Individuals plan consumption over their entire lifetime

D. Saving is independent of age

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Correct Answer: Option C

Explanation:
The life-cycle hypothesis, associated with Modigliani, posits that individuals smooth consumption over their lifetime by saving during working years and dissaving during retirement.

This question belongs to: Economy GK Economy Set 1

Question #3

The term 'Quantitative Easing' refers to:

A. Increase in CRR

B. Increase in policy interest rates

C. Large-scale purchase of assets by the central bank to inject liquidity

D. Reduction in government expenditure

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Correct Answer: Option C

Explanation:
Quantitative easing is an unconventional monetary policy tool whereby a central bank purchases large quantities of financial assets to inject liquidity into the economy when interest rates are already near zero.

This question belongs to: Economy GK Economy Set 1

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