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Public finance - Exam
Contributed by: Leonard
  • 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) Maximizing profit
B) Reducing competition
C) Provision of public goods and services
D) Generating revenue
  • 2. Which of the following is an example of a regressive tax?
A) Property tax
B) Income tax
C) Progressive tax
D) Sales tax
  • 3. What is the role of the budget deficit in public finance?
A) When government saves surplus revenue
B) Generating additional revenue
C) Balancing the budget annually
D) When government spending exceeds revenue
  • 4. What is the Laffer curve used to illustrate in public finance?
A) Inflationary pressures
B) Relationship between tax rates and government revenue
C) Foreign aid expenditure
D) Interest rate fluctuations
  • 5. What are the components of a government budget?
A) Revenue, expenditure, and deficit/surplus
B) Gross domestic product, inflation rate, and employment rate
C) Stock market indices, exchange rates, and bond yields
D) Corporate profits, expenses, and dividends
  • 6. What is the purpose of an excise duty?
A) Tax on property ownership
B) Tax on income
C) Tax on imports
D) Tax on specific goods like alcohol and tobacco
  • 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) Globalization of public services
C) Privatization of public services
D) Centralization of public services under one government agency
  • 8. What is the purpose of a capital gains tax?
A) Tax on income from employment
B) Tax on property ownership
C) Tax on profit from the sale of assets
D) Tax on goods and services
  • 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 illegal, tax avoidance is legal
C) Tax evasion is for corporations, tax avoidance is for individuals
D) Tax evasion is by wealthy people, tax avoidance is by middle class
  • 10. What is the role of the International Monetary Fund (IMF) in public finance?
A) Managing national budgets
B) Regulating global trade agreements
C) Providing financial assistance and policy advice to countries
D) Issuing currency
  • 11. Why is it important for governments to have a stable and predictable tax system?
A) Increases government spending
B) Encourages tax evasion
C) Leads to budget deficits
D) Promotes economic growth and investment
  • 12. What is the significance of the government's budget formulation process?
A) Increases government debt
B) Promotes tax evasion
C) Sets out government priorities and resource allocation
D) Leads to inflation
  • 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) Tax breaks for young individuals.
D) Giving higher priority to the welfare of older generations.
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