IGCSE Economics Paper-1: Specimen Questions with Answers 28 - 29 of 64

Question 28

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Question

MCQ▾

In the short-run, monetary policy influences________ to change the pattern of spending on goods and services.

Choices

Choice (4)
a.Savings
b.Interest rate
c.Inflation rate
d.Taxes

Answer

b.

Explanation

  • Monetary policy id framed by the central government to control the supply of money in the economy. Monetary policy is involved in the money supply management and interest rate regulation to achieve the macroeconomic objective of consumption, savings, growth, and liquidity.
  • Monetary policy is expansionary and contractionary by nature depending on the economic condition.
  • Household decisions like how much to save and consume are affected by the rate of interest. Hence monetary policy effect the spending by consumers on goods and services.

Question 29

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Question

MCQ▾

The table below shows the different amount of tax paid at different level of incomes

The table below shows the different amount of tax paid at different level of incomesThe table below shows the different amount of tax paid at different level of incomes
IncomeTax Paid
5000500
6000600
7000800
80001100

Which kind of tax system prevails?

Choices

Choice (4)
a.Progressive at all levels of income
b.Proportional at all levels of income
c.Proportional at lower level of income, progressive at higher level of income
d.Progressive at lower level of income, proportional at higher level of income

Answer

c.

Explanation

Types of Tax System

Types of Tax System

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  • Tax systems in India fall into three main categories: regressive, proportional, and progressive. Two among the three major tax system impact high- and low-income earners in a different manner.
    • Progressive Tax: A progressive tax system imposes a greater percentage of tax on high income earners, working on the theory that high-income earners can afford to pay more.
    • Regressive Tax: A regressive tax imposes the same percentage of tax regardless of a person income. In this type of tax system poor has to pay more amount of tax.
    • Proportional Tax: In case of proportional tax, system taxis charged from person based on their income. The poor are charged with less amount of tax as compared to the high-income earners.
  • In the given question, tax is charged on proportional level at lower income whereas high percentage of tax is charged at high level of income.

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