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Public finance
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) Reducing competition
B) Maximizing profit
C) Generating revenue
D) Provision of public goods and services
  • 2. Which of the following is an example of a regressive tax?
A) Income tax
B) Property tax
C) Progressive 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) 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) Revenue, expenditure, and deficit/surplus
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 specific goods like alcohol and tobacco
B) Tax on imports
C) Tax on property ownership
D) Tax on income
  • 7. What is the role of the principle of subsidiarity in public finance?
A) Globalization of public services
B) Decentralization of public services to the lowest level of government
C) Centralization of public services under one government agency
D) Privatization of public services
  • 8. What is the purpose of a capital gains tax?
A) Tax on income from employment
B) Tax on profit from the sale of assets
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 for corporations, tax avoidance is for individuals
B) Tax evasion is avoiding taxes, tax avoidance is delaying taxes
C) Tax evasion is illegal, tax avoidance is legal
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) 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) Leads to budget deficits
B) Encourages tax evasion
C) Increases government spending
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) Leads to inflation
D) Sets out government priorities and resource allocation
  • 13. What is the impact of government spending on economic growth?
A) Reduces competition
B) Can stimulate economic activity and employment
C) Increases taxes
D) Leads to lower inflation
  • 14. What is the concept of intergenerational equity in public finance?
A) Giving higher priority to the welfare of older generations.
B) Ensuring current generations do not burden future generations with excessive debt.
C) Encouraging wealth accumulation for future generations.
D) Tax breaks for young individuals.
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