Economic Growth and Taxes MCQs | Effects of taxation

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Economic growth is a long-term expansion of a country’s production potential. Economic growth is seen as a more permanent increase in what output the
Growth and taxes MCQs

Taxation and Economic Growth MCQs

Economic growth is a long-term expansion of a country’s production potential. Economic growth is seen as a more permanent increase in what output the economy is able to produce. Here on MCQs.club we have prepared Multiple Choice Questions (MCQs) on taxation and economic growth. Moreover, these also cover relationship between taxes and economic growth, impact of taxation on economic development, tax revenue and GDP relationship. These MCQs are useful for Professional accountancy students, Business Management exams and competitive exams.

  1. Which of the following is correct for Economic growth?
    1. Economic growth is a long-term expansion of a country’s production potential.
    2. Economic growth is seen as a more permanent increase in what output the economy is able to produce.
    3. Both A&B
    4. None
  1. Advantages of Economic growth include:
    1. Higher living standards – an increase in the real income of the individuals in an economy.
    2. Employment effects – with economic growth, the capacity in an economy increases and therefore there is more opportunity for employment within society.
    3. Fiscal benefits – with higher GDP growth, firms and individuals will increase the amount of taxes that they pay.
    4. All of the above
  1. Disadvantages of Economic growth include:
    1. Fast growth may be at the expense of the natural environment
    2. Economic growth merely exacerbates inequality that is present in an economy.
    3. With an increased economic output, there are concerns that workers may be exploited, working longer hours than they should.
    4. All of the above
  1. All of the following are true for Business cycles EXCEPT:
    1. The recurring fluctuations of output that an economy experiences over a long period of time.
    2. There are distinct phases in Business cycles which one can analyse, recognise, and therefore use an indicator for future events.
    3. Every Business cycle will be identical.
    4. None
  1. Identify which of the following characteristics Business cycle shows during the Prosperity (Boom period) phase.
    1. The economy is expanding, meaning output, income, employment, prices and profits should all increase.
    2. At this stage, banks issue credit more freely which facilitates firms to invest in increasing output to meet the demands of consumers with higher income.
    3. Output grows, as does overall business optimism.
    4. All of the above
  1. Identify which of the following characteristics Business cycle shows during the Downturn phase.
    1. At this stage, economic activity begins to slow down.
    2. The firms begin to scale back their production and investment plans.
    3. Banks reduce the credit they issue, firms cancel orders that they place, and people begin to lose their jobs.
    4. All of the above
  1. Identify which of the following characteristics Business cycle shows during the Recession/depression phase.
    1. The economy slips into a state where output remains very low.
    2. There is an under-utilisation of resources as machinery lies dormant.
    3. Business confidence is extremely low, as profits and prices go lower and lower.
    4. All of the above
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