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

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

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

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

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

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

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

5. What are the components of a government budget?

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

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

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

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

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

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

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

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

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

10. What is the purpose of an excise duty?

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

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

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

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

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

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

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

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

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

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