CA Foundation P4 · Chapter 7 · Question 14 of 15
Which of the following acts as an automatic (built-in) stabiliser?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A progressive income tax system
Explanation
Automatic stabilisers change without new policy action. With a progressive income tax, tax collections rise more than proportionately in a boom and fall in a slump, dampening fluctuations in disposable income. Discretionary changes require deliberate decisions; the repo rate is a monetary tool.
More Public Finance MCQs
- Q1According to Richard Musgrave, the three fiscal functions of the government are:
- Q2Pure public goods are characterised by:
- Q3The 'free rider' problem means that:
- Q4When the production of a good generates a negative externality such as pollution, the free market will:
- Q5A tax imposed on a polluting firm equal to the marginal external cost of its activity is known as a: