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Question
Define fiscal policy.
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Solution 1
Fiscal policy can be defined as the policy under which the government uses its expenditure and to revenue programmes to produce desirable effects.
Solution 2
According to G.K. Shaw, "We define fiscal policy as any decision to change in the level, composition or timing of government expenditure or change in burden, structure and frequency of the tax payments."
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RELATED QUESTIONS
Match the following:
| Column I | Column II | ||
| A. | Direct tax | (i) | Tax rate increases with tax base |
| B. | Indirect tax | (ii) | Tax rate remains constant |
| C. | Proportional tax | (iii) | Imposed on goods and services |
| D. | Progressive tax | (iv) | Impact and incidence lie on the same person |
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Citing reason state the advantage of a progressive tax over proportional tax.
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