(A) lower the required reserve ratio and the statutory liquidity ratio.
(B) lower interest rates.
(C) buy government securities on the open market.
(D) sell government securities on the open market.
The increase in base money divided by the corresponding induced increase in commercial bank deposits is the?
(A) bank’s line of credit.
(B) reserve ratio.
(C) current ratio.
(D) money multiplier.
Which of the following is not a correct argument against a fiscal policy expansion – say a tax cut – aimed at lifting aggregate demand?
(A) The expansion might become pro-cyclical ex-post, given the lag time required to change
fiscal policy.
(B) Fiscal policy works with a lag, thus a tax cut introduced today would not have an
expansionary effect on aggregate demand till many months later.
(C) The fiscal expansion would increase distortion in the economy.
(D) Lower taxes would increase the government’s borrowing requirement, which in turn
would cause interest rates to rise, which in turn would i) cause the exchange rate to
appreciate, which in turn would cause the current account to move into deficit, and ii)
crowd out private investment.
Let us say assume the Pakistani government is facing a fiscal deficit. Which of the following would not constitute a possible method of financing this deficit?
(A) printing rupees (borrowing from the central bank)
(B) selling dollars in the foreign exchange market
(C) imposing new taxes or raising existing tax rates
(D) borrowing from an international financial institution
You know that all taxes are distortionary. Under what conditions will this knowledge lead you to oppose the imposition of every single tax in the economy?
(A) If you live in a 1st best world
(B) If you live in a 2nd best world
(C) If the tax rates on some of the items are prohibitively high
(D) Either of the above
Tax incidence is the?
(A) ultimate distribution of a tax’s burden.
(B) measure of the impact the tax has on employment and output.
(C) behaviour of shifting the tax to another party.
(D) structure of the tax.
A 15% VAT is a(n):
(A) Proportional income tax.
(B) Fixed excise duty.
(C) Ad valorem indirect tax.
(D) None of the above.
The government imposes a new income tax legislation under which every male taxpayer must pay 15% of his income as taxes, while every female taxpayer must pay 20% of her income as taxes. Such tax legislation violates which equity principle?
(A) Both horizontal equity and vertical equity
(B) Vertical equity only
(C) Horizontal equity only
(D) Neither