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- Subject
- Fiscal And Monetary Policyeconomics-mcqs › fiscal-and-monetary-policy
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
Which statement accurately describes a regressive tax system?
Multiple choice question for Fiscal And Monetary Policy. Select an option, then review the explanation below.
Explanation
In a regressive tax system, the average tax rate decreases as income rises, meaning lower-income earners pay a higher proportion of their income in taxes compared to higher-income earners. While the total tax paid might increase with income, the key characteristic is the falling average tax rate. Marginal tax rates and constant average rates are not features of regressive taxation.
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.What is the automatic effect on the government's budget balance when the economy experiences growth?
- 3.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?
- 4.Which of the following actions aligns with a reflationary (expansionary) fiscal policy?
- 5.What does over-funding mean in the context of the State Bank of Pakistan's actions?