Question : By increasing the tax burden on the households, the government intends to:
Option 1: correct the situation of deficient demand
Option 2: correct the situation of the inflationary gap
Option 3: correct the situation of excess demand
Option 4: both (a) and (c)
Correct Answer: correct the situation of excess demand
Solution : The correct answer is (c) correct the situation of excess demand
Increasing the tax burden on households can help reduce excess demand in the economy. When households have higher tax obligations, they have less disposable income available for consumption and savings. This reduction in disposable income can lead to a decrease in spending and aggregate demand, helping to address the situation of excess demand.
Increasing taxes is typically used as a contractionary fiscal policy tool to cool down an overheating economy and control inflationary pressures caused by excessive aggregate demand.
Question : ________________ causes involuntary unemployment in the economy.
Option 1: Excess demand
Option 2: Deficient demand
Option 3: Excess supply
Option 4: Deficient supply
Question : Burden of tax which cannot be shifted on to the others, is called
Option 1: GST
Option 2: Direct tax
Option 3: Indirect tax
Option 4: Wealth tax
Question : ___________________ causes the general price level to fall due to lack of demand for goods and services in the economy.
Option 4: Deficient demand
Question : _______________ causes the general price level to rise (also known as inflation) in the economy.
Question : To correct the situation of the deflationary gap, the central bank:
Option 1: increases margin requirement
Option 2: decreases margin requirement
Option 3: increases cash reserve ratio
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