ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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eliminate barriers to trade
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improve access to natural resources
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encourage entrepreneurship
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reduce the cost of capital investments
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Detailed explanation-1: -When government increases its spending, it stimulates aggregate demand, and causes some real GDP growth. That growth creates jobs, and more workers earn income. That new income sparks greater consumer spending, which drives aggregate demand even more, and causes additional real GDP growth.
Detailed explanation-2: -It is essential that in order to increase the tax to GDP ratio India’s informal sector is brought into the formal fold and there should be progressive income taxes, complemented by indirect taxation, property taxes, and capital taxes, etc. Thus focus should be on widening the tax base rather than simply deepening it.
Detailed explanation-3: -Both monetary and fiscal policies are used to regulate economic activity over time. They can be used to accelerate growth when an economy starts to slow or to moderate growth and activity when an economy starts to overheat. In addition, fiscal policy can be used to redistribute income and wealth.
Detailed explanation-4: -As the government increases the tax rate, the revenue also increases until T*. Beyond point T*, if the tax rate is increased, revenue starts to fall. In short, attempts to tax above a certain level are counterproductive and actually result in less total tax revenue.