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PUBLIC FINANCE IN CANADA (6TH EDITION) — ROSEN, GAYER, TEDDS,
TOMBE EXAM QUESTIONS AND CORRECT ANSWERS LATEST EDITION
2026
Public Finance in Canada (6th Edition) — Rosen, Gayer, Tedds, Tombe
Original Practice Questions — Public Finance in Canada (6th Edition)
Chapter 1: Introduction to Public Finance in Canada (Questions 1–20)
1. Which of the following best describes "public finance" in Canada?
A) The study of how corporations manage their funds
B) The study of how governments collect and spend revenue
C) The study of how individuals invest in the stock market
D) The study of bank lending practices
Answer: B
Rationale: Public finance focuses on how governments (federal, provincial, municipal) raise
revenue (taxation, borrowing, etc.) and allocate expenditures (public programs, infrastructure,
etc.) .
2. The primary source of federal government revenue in Canada is:
A) Corporate income taxes
B) Personal income taxes
C) Property taxes
D) Excise taxes
Answer: B
Rationale: In Canada, the largest share of federal revenue typically comes from personal income
taxes, followed by corporate income taxes and other forms of taxation .
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3. In Canada, which level of government primarily collects property taxes?
A) Federal government
B) Provincial governments
C) Municipal governments
D) Indigenous band councils
Answer: C
Rationale: Municipal governments in Canada usually collect property taxes to fund local services
such as police, fire departments, and local infrastructure .
4. The Goods and Services Tax (GST) in Canada is an example of:
A) Direct tax
B) Progressive tax
C) Indirect tax
D) Lump-sum tax
Answer: C
Rationale: The GST is an indirect tax levied on the sale of most goods and services. Sellers
collect it from consumers and then remit it to the government .
5. Fiscal federalism in Canada refers to:
A) The distribution of fiscal authority and responsibilities between provinces and territories
B) The distribution of economic decision-making powers between the public and private sector
C) The allocation of taxing and spending powers among different levels of government
D) The process by which federal budgets are drafted and approved
Answer: C
Rationale: Fiscal federalism examines how revenue-raising and expenditure responsibilities are
allocated among federal, provincial/territorial, and municipal governments .
6. The federal government provides equalization payments to provinces in order to:
A) Support provinces in building nuclear power plants
B) Encourage provinces to lower personal income tax rates
C) Ensure provinces have sufficient revenue to provide comparable public services
D) Finance all municipal infrastructure projects
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Answer: C
Rationale: The equalization program in Canada aims to help less prosperous provinces provide
public services at levels similar to those in wealthier provinces .
7. Which of the following taxes is collected jointly by the federal and provincial governments
in several provinces through a "harmonized" arrangement?
A) Harmonized Sales Tax (HST)
B) Progressive Income Tax (PIT)
C) Property Tax
D) Corporate Income Tax
Answer: A
Rationale: The Harmonized Sales Tax (HST) combines the federal GST with provincial sales taxes
in participating provinces .
8. The economic role of government in Canada has, over time:
A) Declined significantly
B) Grown tremendously
C) Remained constant
D) Been too small to matter
Answer: B
Rationale: The economic role of government has grown tremendously over time, reflecting
increased public expenditures and taxation .
9. Which of the following is NOT a primary goal of public finance?
A) Allocation
B) Distribution
C) Stabilization
D) Privatization
Answer: D
Rationale: The primary goals of public finance are allocation (providing public goods),
distribution (redistributing income), and stabilization (managing economic fluctuations) .
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10. In Canada, the federal government is responsible for which of the following?
A) Elementary and secondary education
B) National defense
C) Local police services
D) Property tax collection
Answer: B
Rationale: National defense is a federal responsibility. Education is primarily provincial, and
police and property taxes are municipal .
11. The "flypaper effect" refers to which phenomenon in fiscal federalism?
A) Grants stick where they are sent, increasing local spending more than equivalent private
income
B) Provinces always spend less than they receive
C) Federal grants reduce provincial spending
D) Equalization payments reduce economic growth
Answer: A
Rationale: The flypaper effect describes how intergovernmental grants increase local
government spending more than an equivalent increase in private income would .
12. Which of the following is a rationale for government intervention in the economy?
A) Market efficiency always
B) Market failure
C) Perfect competition
D) Complete information
Answer: B
Rationale: Market failure—including public goods, externalities, and imperfect competition—
provides a rationale for government intervention .
13. In Canada, which level of government has primary responsibility for health care?
A) Federal
B) Provincial
C) Municipal
D) Indigenous
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PUBLIC FINANCE IN CANADA (6TH EDITION) — ROSEN, GAYER, TEDDS,
TOMBE EXAM QUESTIONS AND CORRECT ANSWERS LATEST EDITION
2026
Public Finance in Canada (6th Edition) — Rosen, Gayer, Tedds, Tombe
Original Practice Questions — Public Finance in Canada (6th Edition)
Chapter 1: Introduction to Public Finance in Canada (Questions 1–20)
1. Which of the following best describes "public finance" in Canada?
A) The study of how corporations manage their funds
B) The study of how governments collect and spend revenue
C) The study of how individuals invest in the stock market
D) The study of bank lending practices
Answer: B
Rationale: Public finance focuses on how governments (federal, provincial, municipal) raise
revenue (taxation, borrowing, etc.) and allocate expenditures (public programs, infrastructure,
etc.) .
2. The primary source of federal government revenue in Canada is:
A) Corporate income taxes
B) Personal income taxes
C) Property taxes
D) Excise taxes
Answer: B
Rationale: In Canada, the largest share of federal revenue typically comes from personal income
taxes, followed by corporate income taxes and other forms of taxation .
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,Page 2 of 68
3. In Canada, which level of government primarily collects property taxes?
A) Federal government
B) Provincial governments
C) Municipal governments
D) Indigenous band councils
Answer: C
Rationale: Municipal governments in Canada usually collect property taxes to fund local services
such as police, fire departments, and local infrastructure .
4. The Goods and Services Tax (GST) in Canada is an example of:
A) Direct tax
B) Progressive tax
C) Indirect tax
D) Lump-sum tax
Answer: C
Rationale: The GST is an indirect tax levied on the sale of most goods and services. Sellers
collect it from consumers and then remit it to the government .
5. Fiscal federalism in Canada refers to:
A) The distribution of fiscal authority and responsibilities between provinces and territories
B) The distribution of economic decision-making powers between the public and private sector
C) The allocation of taxing and spending powers among different levels of government
D) The process by which federal budgets are drafted and approved
Answer: C
Rationale: Fiscal federalism examines how revenue-raising and expenditure responsibilities are
allocated among federal, provincial/territorial, and municipal governments .
6. The federal government provides equalization payments to provinces in order to:
A) Support provinces in building nuclear power plants
B) Encourage provinces to lower personal income tax rates
C) Ensure provinces have sufficient revenue to provide comparable public services
D) Finance all municipal infrastructure projects
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,Page 3 of 68
Answer: C
Rationale: The equalization program in Canada aims to help less prosperous provinces provide
public services at levels similar to those in wealthier provinces .
7. Which of the following taxes is collected jointly by the federal and provincial governments
in several provinces through a "harmonized" arrangement?
A) Harmonized Sales Tax (HST)
B) Progressive Income Tax (PIT)
C) Property Tax
D) Corporate Income Tax
Answer: A
Rationale: The Harmonized Sales Tax (HST) combines the federal GST with provincial sales taxes
in participating provinces .
8. The economic role of government in Canada has, over time:
A) Declined significantly
B) Grown tremendously
C) Remained constant
D) Been too small to matter
Answer: B
Rationale: The economic role of government has grown tremendously over time, reflecting
increased public expenditures and taxation .
9. Which of the following is NOT a primary goal of public finance?
A) Allocation
B) Distribution
C) Stabilization
D) Privatization
Answer: D
Rationale: The primary goals of public finance are allocation (providing public goods),
distribution (redistributing income), and stabilization (managing economic fluctuations) .
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10. In Canada, the federal government is responsible for which of the following?
A) Elementary and secondary education
B) National defense
C) Local police services
D) Property tax collection
Answer: B
Rationale: National defense is a federal responsibility. Education is primarily provincial, and
police and property taxes are municipal .
11. The "flypaper effect" refers to which phenomenon in fiscal federalism?
A) Grants stick where they are sent, increasing local spending more than equivalent private
income
B) Provinces always spend less than they receive
C) Federal grants reduce provincial spending
D) Equalization payments reduce economic growth
Answer: A
Rationale: The flypaper effect describes how intergovernmental grants increase local
government spending more than an equivalent increase in private income would .
12. Which of the following is a rationale for government intervention in the economy?
A) Market efficiency always
B) Market failure
C) Perfect competition
D) Complete information
Answer: B
Rationale: Market failure—including public goods, externalities, and imperfect competition—
provides a rationale for government intervention .
13. In Canada, which level of government has primary responsibility for health care?
A) Federal
B) Provincial
C) Municipal
D) Indigenous
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