The 'Ricardo equivalence' proposition states that: MCQ with Answer and Explanation

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The 'Ricardo equivalence' proposition states that:

A. government spending is always contractionary

B. taxes have no effect

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

D. government borrowing is always expansionary

Answer: Option C

Solution (By JKSSB Mock Tests)

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

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Question #1

The Laffer curve shows the relationship between:

A. income and consumption

B. tax rate and tax revenue

C. inflation and unemployment

D. interest rate and investment

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Correct Answer: Option B

Explanation:
The Laffer curve shows the relationship between tax rates and total tax revenue.

This question belongs to: Economy GK Economy Set 1

Question #2

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

A. The legal liability to pay the tax

B. The final burden of the tax after shifting

C. The total tax revenue collected

D. The administrative cost of tax collection

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Correct Answer: Option B

Explanation:
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

Question #3

PM-KISAN provides income support to farmer families of how much per year?

A. Rs 10,000

B. Rs 12,000

C. Rs 6,000

D. Rs 2,000

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Correct Answer: Option C

Explanation:
PM-KISAN provides Rs 6,000 per year in three equal instalments to eligible farmer families.

This question belongs to: Economy GK Economy Set 1

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