Macro

Government Budget

Easy

The Proportional Income Tax, acts as an __________, a shock absorber because it makes disposable income, and thus consumer spending purposes less sensitive to fluctuation in GDP.

Automatic stabiliser

Lender of the last resort

Banker to commercial bank

Open market operation

✅ Correct Option: 1

A proportional income tax automatically dampens fluctuations: when GDP rises, tax collections rise and restrain spending; when GDP falls, tax burden falls and cushions disposable income. Such a built-in shock absorber is called an automatic stabiliser.

2026: 21 May Shift 2

Among the following which are the functions of government budget?

A. Allocation.

B. Redistribution.

C. Production.

D. Stabilisation.

Choose the correct answer from the options given below:

2022: 16 July Shift 2

_____ is included in the government budget as a capital receipt.

2026: 20 May Shift 1

If investment falls, government spending can be raised so that autonomous expenditure and equilibrium income remain the same. This deliberate action to stabilise the economy is often referred to as:

2022: 10 Aug Shift 2

'Rs. 48,000 cr is allotted for PM Awas Yojana in this years budget'.

Identify the government objective fulfilled from the statement above.

2022: 16 July Shift 2

Pick out the incorrect one :

2026: 11 May Shift 2

Which of the following will be part of Revenue Expenditure?

A. Subsidies on exports.

B. Interest payments on debt incurred by the government.

C. Loans and advances by the central government to state government.

D. Salaries paid to the government employees.

Choose the correct answer from the options given below:

The Proportional Income Tax, acts as an __________, a shock absorber because it makes disposable income, and thus consumer spending purposes less sensitive to fluctuation in GDP.

Solution

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