Economics Unit 10: Public Finance - Questions and Answers
Q1: What is the main objective of public finance?
A1: To manage government income and expenditure to achieve economic stability and growth.
Q2: Define direct and indirect taxes.
A2: Direct taxes are levied directly on individuals (e.g., income tax), while indirect taxes are imposed
on goods and services (e.g., VAT).
Q3: What is a fiscal deficit?
A3: A fiscal deficit occurs when government expenditure exceeds its revenue (excluding
borrowings).
Q4: Explain the principle of equity in taxation.
A4: It means that taxes should be fair, where individuals contribute according to their ability to pay.
Q5: Name two tools of fiscal policy.
A5: Government spending and taxation.
Q6: What is public debt?
A6: Public debt refers to money borrowed by the government to meet expenditures exceeding
revenue.
Q7: Differentiate between a balanced and a surplus budget.
A7: A balanced budget has revenue equal to expenditure, while a surplus budget has revenue
Q1: What is the main objective of public finance?
A1: To manage government income and expenditure to achieve economic stability and growth.
Q2: Define direct and indirect taxes.
A2: Direct taxes are levied directly on individuals (e.g., income tax), while indirect taxes are imposed
on goods and services (e.g., VAT).
Q3: What is a fiscal deficit?
A3: A fiscal deficit occurs when government expenditure exceeds its revenue (excluding
borrowings).
Q4: Explain the principle of equity in taxation.
A4: It means that taxes should be fair, where individuals contribute according to their ability to pay.
Q5: Name two tools of fiscal policy.
A5: Government spending and taxation.
Q6: What is public debt?
A6: Public debt refers to money borrowed by the government to meet expenditures exceeding
revenue.
Q7: Differentiate between a balanced and a surplus budget.
A7: A balanced budget has revenue equal to expenditure, while a surplus budget has revenue
