Free Public Finance MCQs with Answers
406 Public Finance MCQs from Economics, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
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.
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406 questions · page 21 of 21
- A. Value of the taxed good or transaction
- B. Physical quantity of the taxed good
- C. Age of the person paying the tax
- D. Profit earned by the tax authority
Explanation: An ad valorem tax is calculated as a percentage of the value of a good, service, or transaction.
Correct answer: Value of the taxed good or transaction402. Which outcome is most likely when public expenditure on basic education increases substantially?
- A. Greater human capital formation
- B. Lower productive capacity in the long run
- C. A permanent fall in labour participation
- D. A complete removal of income inequality
Explanation: Spending on basic education can improve skills, productivity, and future earning capacity, so it contributes to human capital formation.
Correct answer: Greater human capital formation- A. Revenue exceeds expenditure during the budget period
- B. Expenditure exceeds revenue during the budget period
- C. Public debt equals annual tax revenue
- D. Capital receipts equal current expenditure
Explanation: A budget surplus occurs when government receipts are greater than government expenditure over the relevant period.
Correct answer: Revenue exceeds expenditure during the budget period- A. A policy creates costs greater than its social benefits
- B. A market supplies a good at its equilibrium price
- C. A household saves part of its disposable income
- D. A firm reduces costs through improved technology
Explanation: Government failure occurs when public intervention produces an inefficient or harmful outcome, such as excessive costs, poor incentives…
Correct answer: A policy creates costs greater than its social benefits- A. Public money other than Federal Consolidated Fund receipts
- B. Only income collected through federal income tax
- C. Only loans raised by the federal government
- D. Only grants received from foreign governments
Explanation: The Public Account contains public money received by or deposited with the federal government other than amounts forming part of the…
Correct answer: Public money other than Federal Consolidated Fund receipts- A. To promote long-term fiscal sustainability
- B. To guarantee a fixed exchange rate
- C. To eliminate all taxation on households
- D. To ensure every annual budget has a surplus
Explanation: A debt-to-GDP limit is intended to keep public borrowing within a level that the economy can service over time.
Correct answer: To promote long-term fiscal sustainability