Eco finaL

Question 1

What does fiscal policy refer to?

Answer 1

Government actions that affect total government spending, tax rates and revenues, and the government budget surplus or deficit.

Question 2

What is the primary function of fiscal policy?

Answer 2

To manage the government’s revenue and expenditure.

Question 3

What are the main components of government spending?

Answer 3

• Current Government Spending
• Capital Spending
• Transfer Payments

Question 4

What does a balanced budget imply?

Answer 4

Government spending is fully funded by tax revenue.

Question 5

What is a deficit budget?

Answer 5

Involves an increase in government spending (G > T) through a rise in spending or a fall in tax revenue.

Question 6

What is a surplus budget?

Answer 6

Involves a decrease in government spending (G < T) through higher taxation or reduction of government spending.

Question 7

What is the purpose of government spending?

Answer 7

• Direct provision of public goods
• Provide welfare supports
• Redistribution of income
• Control of aggregate demand

Question 8

What are the two broad categories of fiscal policy in Bangladesh?

Answer 8

• Government Revenues
• Public Expenditure

Question 9

What is the Annual Development Programme (ADP)?

Answer 9

An organized list of projects and allocations for a year out of a five-year plan for government development policies.

Question 10

What are the types of taxes?

Answer 10

• Direct Tax
• Indirect Tax

Question 11

What is a direct tax?

Answer 11

Imposed on income, wealth, and profit.

Question 12

What is an indirect tax?

Answer 12

Imposed on spending by consumers on goods and services.

Question 13

What are examples of direct taxes?

Answer 13

• Income tax
• National Insurance contributions
• Capital gain tax
• Corporation tax

Question 14

What are examples of indirect taxes?

Answer 14

• VAT
• Car tax
• Excise duties
• Tariffs

Question 15

What is the cost of the tax system to taxpayers?

Answer 15

• Reduces disposable income
• Creates deadweight loss
• Administrative burden

Question 16

What are the two objectives in designing a tax system?

Answer 16

• Increasing Efficiency
• Maintaining Equity

Question 17

What does the benefits principle in taxation state?

Answer 17

People should pay taxes based on the benefits they receive from government services.

Question 18

What is the ability-to-pay principle in taxation?

Answer 18

Taxes should be imposed according to how well a person can bear the burden.

Question 19

What is vertical equity?

Answer 19

Taxpayers with a greater ability to pay should pay larger amounts of taxes.

Question 20

What is horizontal equity?

Answer 20

Different taxpayers with similar abilities should pay the same amount of taxes.

Question 21

What is the role of government in managing aggregate demand?

Answer 21

To help meet macroeconomic objectives like stable inflation and economic growth.

Question 22

What is the significance of fiscal policy in economic growth?

Answer 22

It is fundamental to fostering economic growth through sound expenditure management.

Question 23

Fill in the blank: A government budget is a document presenting the government’s proposed _______ and spending for a financial year.

Answer 23

[revenues]

Question 24

True or False: The burden of direct taxes can be shifted.

Answer 24

False

Question 25

True or False: Indirect taxes are imposed on income.

Answer 25

False

Question 26

What principle states that individuals with a greater ability to pay should pay larger amounts of taxes?

Answer 26

Vertical equity ## Footnote This principle implies that people with higher incomes should pay more taxes than those with lower incomes.

Question 27

What is horizontal equity?

Answer 27

The idea that different taxpayers with similar abilities should pay the same amount of taxes ## Footnote For example, two families with the same number of dependents and the same income should pay the same amount of taxes.

Question 28

What type of tax system has high-income and low-income taxpayers paying the same percentage of tax from their income?

Answer 28

Proportional tax ## Footnote This tax structure applies the same tax rate regardless of income level.

Question 29

In a regressive tax system, how do high-income taxpayers' tax payments compare to low-income taxpayers'?

Answer 29

High-income taxpayers pay a smaller percentage of their income than low-income taxpayers ## Footnote This means that as income increases, the proportion of tax paid decreases.

Question 30

What characterizes a progressive tax system?

Answer 30

High-income taxpayers pay a larger percentage of their income than low-income taxpayers ## Footnote This system is designed to impose a higher tax burden on those who can afford it.