Public finance

1. Public finance is the study of the role of the government in the economy. It encompasses all activities related to the collection of revenue through taxes and other means, as well as the allocation of funds for public services and goods. Public finance also involves budgeting, spending, borrowing, and managing the financial resources of the government. It aims to ensure that public funds are used efficiently and effectively to promote economic growth, social welfare, and overall prosperity for the society.

What is the purpose of public expenditure?

A) Generating revenue
B) Maximizing profit
C) Reducing competition
D) Provision of public goods and services

2. Which of the following is an example of a regressive tax?

A) Property tax
B) Progressive tax
C) Income tax
D) Sales tax

3. What is the role of the budget deficit in public finance?

A) Generating additional revenue
B) Balancing the budget annually
C) When government spending exceeds revenue
D) When government saves surplus revenue

4. What is the Laffer curve used to illustrate in public finance?

A) Interest rate fluctuations
B) Inflationary pressures
C) Relationship between tax rates and government revenue
D) Foreign aid expenditure

5. What are the components of a government budget?

A) Gross domestic product, inflation rate, and employment rate
B) Stock market indices, exchange rates, and bond yields
C) Revenue, expenditure, and deficit/surplus
D) Corporate profits, expenses, and dividends

6. What is the purpose of an excise duty?

A) Tax on specific goods like alcohol and tobacco
B) Tax on income
C) Tax on imports
D) Tax on property ownership

7. What is the role of the principle of subsidiarity in public finance?

A) Decentralization of public services to the lowest level of government
B) Centralization of public services under one government agency
C) Privatization of public services
D) Globalization of public services

8. What is the purpose of a capital gains tax?

A) Tax on goods and services
B) Tax on property ownership
C) Tax on profit from the sale of assets
D) Tax on income from employment

9. What is the difference between tax evasion and tax avoidance?

A) Tax evasion is avoiding taxes, tax avoidance is delaying taxes
B) Tax evasion is by wealthy people, tax avoidance is by middle class
C) Tax evasion is for corporations, tax avoidance is for individuals
D) Tax evasion is illegal, tax avoidance is legal

10. What is the role of the International Monetary Fund (IMF) in public finance?

A) Managing national budgets
B) Providing financial assistance and policy advice to countries
C) Regulating global trade agreements
D) Issuing currency

11. Why is it important for governments to have a stable and predictable tax system?

A) Encourages tax evasion
B) Promotes economic growth and investment
C) Leads to budget deficits
D) Increases government spending

12. What is the significance of the government's budget formulation process?

A) Increases government debt
B) Leads to inflation
C) Sets out government priorities and resource allocation
D) Promotes tax evasion

13. What is the impact of government spending on economic growth?

A) Can stimulate economic activity and employment
B) Leads to lower inflation
C) Reduces competition
D) Increases taxes

14. What is the concept of intergenerational equity in public finance?

A) Giving higher priority to the welfare of older generations.
B) Encouraging wealth accumulation for future generations.
C) Ensuring current generations do not burden future generations with excessive debt.
D) Tax breaks for young individuals.

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