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

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

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

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

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

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

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

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 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 by wealthy people, tax avoidance is by middle class
D) Tax evasion is illegal, tax avoidance is legal

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

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

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

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

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

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

10. What is the purpose of an excise duty?

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

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

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

12. 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

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

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

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

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

Created with That Quiz — the math test generation site with resources for other subject areas.