Which fiscal mechanism tends to support household income automatically during an economic downturn?
Correct answer: C. Progressive income taxation
- A. Higher import tariffs
- B. Lower unemployment benefits
- C. Progressive income taxation
- D. Reduced public investment
Explanation
Progressive income taxation collects less revenue when incomes fall, helping to protect disposable income automatically. Unemployment benefits can also act as stabilizers, but reducing them would weaken this effect.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
Practise Public Finance
406 free Public Finance MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Public Finance questions
Value-added tax is generally classified as an indirect tax because it is:
Which principle of taxation holds that people with greater economic capacity should contribute more to public revenue?
Which situation best illustrates the resource-allocation role of public finance?
In a loanable-funds market, substantial government borrowing may cause crowding out when it:
A government's primary deficit is calculated by excluding which item from total expenditure?
Which item is normally recorded as a development expenditure in a government budget?