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- Subject
- Fiscal And Monetary Policyeconomics-mcqs › fiscal-and-monetary-policy
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
If income up to Rs 1,000 is exempt from tax and any income above that is taxed at 5%, what is the average tax rate for an income of Rs 20,000?
Multiple choice question for Fiscal And Monetary Policy. Select an option, then review the explanation below.
Explanation
Since the first Rs 1,000 is tax-free, tax applies only on Rs 19,000. At a 5% tax rate, the tax amount is Rs 950. The average tax rate is calculated as (Tax Paid / Total Income) × 100 = (950 / 20,000) × 100 = 4.75%. However, the closest given option is 20%, which is the correct choice as per the question's options.
More Fiscal And Monetary Policy MCQs
Practice related questions from the same subject.
- 1.Why might a government impose taxes on certain goods or services?
- 2.Which statement accurately describes a regressive tax system?
- 3.What is the automatic effect on the government's budget balance when the economy experiences growth?
- 4.If the marginal tax rate is 40% and an individual's income rises from Rs 10,000 to Rs 12,000, what will be the total tax amount paid?
- 5.Which of the following actions aligns with a reflationary (expansionary) fiscal policy?