How often Fiscal policy, taxation and public finance is asked

Where it was asked

• May/Jun 201219.5 marks
• Oct/Nov 201119 marks
• May/Jun 201113 marks

The questions

1. May/Jun 2012, Q2.13 marks

   Using a supply-and-demand diagram of the market for cigarettes, show how the imposition of an excise tax changes the equilibrium price and quantity of cigarettes. Make sure your diagram is fully labelled.

2. May/Jun 2012, Q2.29 marks

   Assume you are the chief economic advisor to the government of Mahala, a country currently experiencing demand-pull inflation even though its government has stated price stability as its objective. Using the aggregate demand/aggregate supply diagram provided, explain the steps the Mahala government should take to achieve price stability. On the diagram (worth 3 of the 9 marks) you must clearly show any changes in aggregate demand or aggregate supply, and the resulting changes in prices and production caused by the government's actions. In your written explanation (worth the remaining 6 marks) you must discuss the instruments of fiscal policy available to the government, how each is applied, and what effects they have.

3. May/Jun 2012, QB61.25 marks · multiple choice

   Which of the following is an appropriate measure of the government's involvement in economic activity? (1) the volume of government subsidies; (2) the total government spending; (3) the share of government spending in total spending in the economy; (4) the growth of government spending.

4. May/Jun 2012, QB71.25 marks · multiple choice

   Which type of tax takes a smaller proportion of income from the high-income groups than from the low-income groups? Choose from: (1) Company tax; (2) Value-added tax; (3) Personal income tax; (4) Capital gains tax.

5. May/Jun 2012, QB81.25 marks · multiple choice

   Assuming the supply curve of coffee has its normal upward-sloping shape and that the price elasticity of demand for coffee is relatively elastic, determine on whom a specific tax of R1 placed on each kilogram of coffee will mainly fall. Choose from: (1) entirely by consumers; (2) entirely by producers; (3) more by consumers than by producers; (4) more by producers than by consumers.