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) Provision of public goods and services
D) Reducing competition

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

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

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

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

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

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

5. What are the components of a government budget?

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

6. What is the purpose of an excise duty?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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