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Questions
Explain how indirect taxes can be inflationary.
Explain how indirect taxes prove to be inflationary.
Answer in Brief
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Solution
- Indirect taxes are known to cause significant inflation. Indirect taxes on commodities lead to higher market prices.
- Rising prices increase the cost of living, leading trade unions to seek greater salaries to maintain workers' real incomes.
- Indirect taxes perpetuate a cycle of rising prices, costs, wages, and further price increases.
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Role of State in Economic Development
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RELATED QUESTIONS
Fiscal policy means public expenditure and tax policy of the government.
Monetary policy means regulation of money supply by the monetary authority.
Identify the tax which is most likely to faster civic conciousness.
The following table indicates:
| Tax Base in ₹ | Rate of tax in % |
| 10,000 | 8 |
| 20,000 | 8 |
| 30,000 | 8 |
| 40,000 | 8 |
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| D. | Progressive tax | (iv) | Impact and incidence lie on the same person |
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