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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) Sales tax
B) Property tax
C) Progressive tax
D) Income tax
  • 3. What is the role of the budget deficit in public finance?
A) Balancing the budget annually
B) When government spending exceeds revenue
C) Generating additional revenue
D) When government saves surplus revenue
  • 4. What is the Laffer curve used to illustrate in public finance?
A) Foreign aid expenditure
B) Relationship between tax rates and government revenue
C) Inflationary pressures
D) Interest rate fluctuations
  • 5. What are the components of a government budget?
A) Gross domestic product, inflation rate, and employment rate
B) Stock market indices, exchange rates, and bond yields
C) Corporate profits, expenses, and dividends
D) Revenue, expenditure, and deficit/surplus
  • 6. What is the difference between tax evasion and tax avoidance?
A) Tax evasion is illegal, tax avoidance is legal
B) Tax evasion is for corporations, tax avoidance is for individuals
C) Tax evasion is avoiding taxes, tax avoidance is delaying taxes
D) Tax evasion is by wealthy people, tax avoidance is by middle class
  • 7. What is the purpose of a capital gains tax?
A) Tax on goods and services
B) Tax on profit from the sale of assets
C) Tax on property ownership
D) Tax on income from employment
  • 8. 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
  • 9. Why is it important for governments to have a stable and predictable tax system?
A) Leads to budget deficits
B) Encourages tax evasion
C) Promotes economic growth and investment
D) Increases government spending
  • 10. What is the purpose of an excise duty?
A) Tax on income
B) Tax on property ownership
C) Tax on imports
D) Tax on specific goods like alcohol and tobacco
  • 11. What is the significance of the government's budget formulation process?
A) Leads to inflation
B) Sets out government priorities and resource allocation
C) Promotes tax evasion
D) Increases government debt
  • 12. 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) Issuing currency
D) Regulating global trade agreements
  • 13. What is the impact of government spending on economic growth?
A) Can stimulate economic activity and employment
B) Leads to lower inflation
C) Increases taxes
D) Reduces competition
  • 14. What is the concept of intergenerational equity in public finance?
A) Giving higher priority to the welfare of older generations.
B) Encouraging wealth accumulation for future generations.
C) Tax breaks for young individuals.
D) Ensuring current generations do not burden future generations with excessive debt.
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