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Title Name Amity Solved Assignment BA Economics 4th Sem for Public Finance
University AMITY
Service Type Assignment
Course BA(Economics)
Semester Semester-IV Course: BA(Economics)
Short Name or Subject Code   Public Finance
Commerce line item Type Semester-IV Course: BA(Economics)
Product Assignment of BA(Economics) Semester-IV (AMITY)
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  Questions :-

                                                                                                          Public Finance

      Assignment A 

  1. Explain the economic growth.
  2. Discuss the Welfare state in terms of Labours
  3. What do you understand by Social Welfare Function? Explain

 

 

Assignment B

Case Detail: 

Case Study:

The Earned Income Tax Credit

The Earned Income Tax Credit (EITC) was introduced into the tax system in 1975as a small tax subsidy for the working poor with children. It has been expanded several times and now includes benefits for low-income earners without children, with one child, with two children, and with three or more children. The credit is refundable; after the credit has reduced a filer´s tax liability to zero, the filer is eligible to receive the remainder as a check from the government. The refundable part is technically classified as an outlay in federal budget documents, but people determine the entire credit on their tax forms. The JCT notes that its measure of the tax expenditure includes both the non-refundable and (much larger) refundable portions.

The EITC has three phases. In the first, each added dollar of earned income receives a federal matching credit, which sharply lowers the marginal tax rates of filers whose incomes are within that range. In the second phase, extra earned income has no effect on the credit´s size and no effect on marginal tax rates for filers whose incomes are on the plateau. In the third phase, extra income reduces the credit, which means that the phase-out sharply raises the marginal tax rates of filers whose incomes are within the phase-out range.

For example, in 2012, a single parent with three or more children received a 45 percent match on each dollar of earned income from zero to $13,090 (a marginal tax rate, or tax subsidy, of minus 45 percent), a constant EITC of $5,891 if earned income was in the range $13,090 to $17,090 (no marginal tax rate effect), and lost the credit at a rate of 21.06 cents for each extra dollar of income over the range $17,090-$45,060 (an effective marginal tax rate spike of 21.06 percent). The phase-in powerfully encourages people with very low incomes to work. The phase-out strongly discourages the larger number of people with somewhat higher incomes from working more. It is an empirical question what the net effect on the nation´s labour supply is.

When the Tax Foundation´s Taxes and Growth model is run under the conventional static revenue estimation assumption that all macroeconomic aggregates are fixed, it appears that eliminating the EITC would lift federal revenue by $56 billion. This is close to the Joint Committee on Taxation´s estimate that the EITC was a $59.0 billion tax expenditure in 2012.

When our model is rerun under the dynamic assumption that marginal tax rate changes alter aggregate investment, employment, and economic activity, the model estimates that the negative impact of the phase-out depresses the labour supply by more than the phase-in bolsters the labour supply. Once the economy has adjusted, GDP would be $34 billion higher without the EITC. Because of the growth effect, the model further estimates that the dynamic revenue increase, $64 billion, would exceed the static estimate.

The growth could be enhanced if the added revenue financed a cut in marginal tax rates. Chart 2, below, shows the outcome if the size of the rate cut were geared to the conventional static revenue estimate. Individual income tax rates could be dropped 5.7 percent (for instance, the current 25 percent rate would become 23.6 percent). The model estimates that as a result of trading the EITC for an across-the-board tax rate reduction, GDP would be a net $125 billion larger than otherwise and federal revenue would be a net $29 billion higher.

We believe that, on net, the EITC probably reduces total hours worked as people who are already in the labour force react adversely to the phase-out. However, several studies have found that the EITC encourages some people to enter the work force that otherwise would not at a rate greater than this model assumes. On the other hand, a second effect outside the model cuts in the other direction. A long series of studies by government watchdog agencies have found a considerable amount of EITC fraud, with over 20 percent of payments being improper. In cases where people have filed tax returns claiming phony work and phantom earned income in order to receive real EITC payments, the credit could be removed with no reduction in work effort in any area except for tax fraud investigation.

Finally, we determined the impact of these scenarios on employment and wages.

We found that eliminating the EITC would increase employment by the equivalent of about 274,000 full-time workers with little change in the hourly wage. With the rate cut offset, employment would increase by the equivalent of about 783,000 full-time workers and hourly wages would rise by 0.1 percent.

Key Points:

Eliminating the EITC would:

Increase tax revenues by $56 billion on a static basis;

Increase GDP by $34 billion; and

Produce slightly more revenues ($64 billion) on a dynamic basis;

Increase employment by the equivalent of approximately 274,000 full-time workers; and

Produce little change in hourly wages.

Eliminating the EITC and trading the static revenue gains for individual rate cuts would:

Allow for an across-the-board rate cut of 5.7 percent;

Boost GDP by $125 billion per year; and

Boost federal revenues by $29 billion on a dynamic basis;

Increase employment by the equivalent of approximately 783,000 full-time workers; and

Increase hourly wages by 0.1 percent

In these reports, Tax Foundation economists use our macroeconomic model to answer two questions lawmakers are considering:

Question

  1. What effect does eliminating these expenditures have on GDP, jobs, and federal revenue?
  2. What would be the effect on GDP, jobs, and federal revenue if the static savings were used to finance tax cuts on a revenue neutral basis?

 

Assignment  C

Question No.  1           Marks - 10

For bad debts to be deductible, the following requisites must concur, except:        

 Options          

  1. There must be a valid a subsisting debt
  2. The debt must be connected with the taxpayer’s trade or business
  3. The debt must be actually worthless
  4. The debt must be partially charged-off within the taxable year

 

 

Question No.  2           Marks - 10

The gradual diminution of the useful value of tangible property resulting from ordinary wear and tear:    

 Options          

  1. Depletion
  2. Depreciation
  3. Declination    
  4. Deduction

 

 

Question No.  3           Marks - 10

Under present law, a family with six children will have a maximum tax exemption of:       

 Options          

  1. P 200,000.00
  2. P 96,000.00
  3. P 150,000.00
  4. P 250,000.00

 

 

Question No.  4           Marks - 10

The following Resident Foreign Corporations are subject to preferential tax rates, except: 

 Options          

  1. Regional Operating Headquarters
  2. International Carriers
  3. Regional Area Headquarters
  4. Offshore Banking Units

 

 

Question No.  5           Marks - 10

A resident Filipino citizen who became an Overseas Contract Worker is taxed as follows: 

 Options          

  1. Tax-exempt
  2. On income derived without the Philippines only
  3. On income derived within and without the Philippines       
  4. On income derived within the Philippines only

 

 

Question No.  6           Marks - 10

The following may be considered De Minimis Benefits, except:      

 Options          

  1. Laundry Allowance
  2. Rice subsidy
  3. Expenses for Foreign Travel
  4. Medical benefits

 

 

Question No.  7           Marks - 10

The following are exempt from improperly accumulated earnings tax, except:        

 Options          

  1. Closely-held corporations
  2. Banks
  3. Publicly-held corporations    
  4. Insurance companies

 

 

Question No.  8           Marks - 10

The Withholding Tax System was devised for the following reasons, except:         

 Options          

  1. To provide the taxpayer a convenient manner to meet his probable income tax liability
  2. To ensure the collection of the income tax
  3. To improve the government’s cash flow       
  4. To do away with the filing of income tax returns

 

 

Question No.  9           Marks - 10

The following property of a resident alien is subject to estate tax upon death:        

 Options          

  1. Real and Personal Property situated within the Philippines
  2. Real and Personal Property wherever situated
  3. Real and Personal Property outside the Philippines
  4. Only Real Property in the Philippines

 

 

Question No.  10         Marks - 10

Which is not included in the Gross Estate subject to Estate Tax?    

 Options          

  1. Transfers in contemplation of death
  2. Revocable Transfers
  3. Transfers for public use         
  4. Transfers for Insufficient consideration

 

 

Question No.  11         Marks - 10

Which of the following is an Indirect Tax?   

 Options          

  1. Income Tax
  2. Entertainment Tax
  3. Profit Tax      
  4. Wealth Tax

 

 

Question No.  12         Marks - 10

Which of the following is a Direct Tax?        

 Options          

  1. Sales Tax
  2. Income Tax
  3. Value Added Tax     
  4. Entertainment Tax

 

 

Question No.  13         Marks - 10

Which of the following is a Revenue Receipt?         

 Options          

  1. Loan from the IMF
  2. Grant Received from the World Bank
  3. Borrowing from the Public   
  4. Sale of the shares held by the government in HMT

 

 

Question No.  14         Marks - 10

Which of the following is a Capital Receipt?

 Options          

  1. Profit Tax
  2. Railway Ticket Fare
  3. Fee of the Government Hospital      
  4. Borrowing from the public

 

 

Question No.  15         Marks - 10

Pick the Odd one out from the following:    

 Options          

  1. Borrowing from the public
  2. Borrowing from the International Financial Organizations
  3. Borrowing from the RBI      
  4. Recovery of Loans

 

 

Question No.  16         Marks - 10

 Which of the following is not Capital Expenditure: 

 Options          

  1. Salary paid to the government employees
  2. Purchase of a machine from Korea
  3. Repayment of loan taken from the IMF       
  4. Interest paid on National Debt

 

 

Question No.  17         Marks - 10

Which one of the following is not the form of Tax Revenue?          

 Options          

  1. Income Tax
  2. Sales Tax
  3. License Fee   
  4. Excise Duty

 

 

Question No.  18         Marks - 10

Identify the Revenue Expenditure:   

 Options          

  1. Subsidies
  2. Loan given to the State Government
  3. Repayment of loans  
  4. Construction of a school building

 

 

Question No.  19         Marks - 10

Identify the Capital Receipts:

 Options          

  1. Penalty
  2. Corporation Tax
  3. Dividends on Investments made by the government           
  4. Sale of a Public Sector Undertaking

 

 

Question No.  20         Marks - 10

Firm’s investment decisions would generally include...................    

 Options          

  1. Expansion
  2. Acquisition
  3. Modernization           
  4. All of the above

 

 

Question No.  21         Marks - 10

The primary budget deficit refers to: 

 Options          

  1. The debt of the federal government
  2. Government expenditures plus transfers net of tax revenues
  3. Interest payment on government debt          
  4. The reported budget deficit minus interest payments on government debt

 

 

Question No.  22         Marks - 10

If government expenditures are $454 billion, transfers $713 billion, tax receipts $1,490 billion, then the reported budget deficit is:        

 Options          

  1. $323 billion
  2. $1,167 billion
  3. $1,749 billion            
  4. Cannot calculate, since we need figures for interest payments

 

 

Question No.  23         Marks - 10

Under a balanced budget policy, the government sets its reported deficit equal to zero. This implies that the government must run:

 Options          

  1. A primary budget deficit equal to the interest payment on its outstanding debt
  2. A primary budget surplus equal to the interest payment on its outstanding debt
  3. A zero primary budget deficit          
  4. A reported budget surplus

 

 

Question No.  24         Marks - 10

The government budget deficit is:     

 Options          

  1. A stock variable
  2. A flow variable
  3. Neither a flow nor a stock variable   
  4. Always increasing over time

 

 

Question No.  25         Marks - 10

Suppose the government has outstanding debt obligations of $400 billion from last year, and it runs a deficit of $85 billion this year. If the nominal interest rate is 5%, then the reported deficit this year is:         

 Options          

  1. $65 billion
  2. $85 billion
  3. $105 billion   
  4. Cannot calculate, need growth rate of nominal GDP.

 

 

Question No.  26         Marks - 10

The steady-state value of b for the difference equation bt = 0.2 + 1.10 bt–1 is:      

 Options          

  1. –2
  2. 2
  3. 3     
  4. Does not exist since it is unstable

 

 

Question No.  27         Marks - 10

The steady-state of the difference equation 3xt = 6 + 1.5 xt–1 is:    

 Options          

  1. 4/3, which is stable
  2. 4/3, which is unstable
  3. 4, which is stable       
  4. 4, which is unstable

 

 

Question No.  28         Marks - 10

Consider the difference equation yt = 4 + 0.5 yt–1. Which of the following statements about the long-run behaviour of y is true, if it starts from 0:       

 Options          

  1. yt diverges away from the steady-state value
  2. yt does not change over time
  3. yt converges to a steady-state value of 8/3   
  4. yt converges to a steady-state value of 8

 

 

Question No.  29         Marks - 10

Let Bt denote the nominal value of government debt in the year t, i denote the interest rate, and Dt denote the primary budget deficit that the government runs in the year t. Which of the following equations describes the law of motion of government debt accurately:          

 Options          

  1. (1+ i)Bt = Bt 1 + Dt − .
  2. Bt = Bt−1 + (1+ i)Dt .
  3. Bt = (1+ i)Bt 1 + Dt − .        
  4. Bt (1 i)Bt−1 Dt−1 = + +

 

 

Question No.  30         Marks - 10

The steady state of a difference equation is unstable, if       

 Options          

  1. The state variable always increases over time irrespective of the starting value.
  2. The state variable always decreases over time irrespective of the starting value.
  3. The state variable always moves towards the steady state, no matter where it starts out from.
  4. The state variable always moves away from the steady state if it does not start exactly at the steady state.

 

 

Question No.  31         Marks - 10

If the nominal rate of interest is 5%, the growth rate of GDP 7%, and the government runs a budget deficit equal 3% of GDP every year, what is the value of the steady-state debt-to-GDP ratio?     

 Options          

  1. 031.
  2. 04
  3. 605
  4. 5

 

 

Question No.  32         Marks - 10

Since 1979, the debt-to-GDP ratio started to increase in U.S. because:       

 Options          

  1. The GDP growth rate was bigger than the nominal interest rate
  2. The nominal interest rate was bigger than the GDP growth rate
  3. The government cut down on its budget deficits     
  4. The U.S. started to run trade surpluses

 

 

Question No.  33         Marks - 10

Fiscal Policy is controlled by:

 Options          

  1. The Federal Reserve Board
  2. Congress and the President
  3. The Supreme Court   
  4. Private banks

 

 

Question No.  34         Marks - 10

The purpose of fiscal policy is to:      

 Options          

  1. Alter the direction of the economy
  2. Change people´s attitudes toward government
  3. Educate people as to the importance of economics  
  4. Offer insight into the way things work

 

 

Question No.  35         Marks - 10

Fiscal policy is purposeful movements in ................... designed to direct an economy.       

 Options          

  1. Interest rates
  2. Legal structures
  3. Government regulations        
  4. Government spending and taxes

 

 

Question No.  36         Marks - 10

Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that: The former deals with interest rates and the latter deals with tax policy The former is built into the system whereas the latter requires timely decisions (c ) The former requires timely decisions whereas the latter is built into the system The former deals with tax policy and the latter deals with interest rates 5. Discretionary Fiscal Policy differs from Nondiscretionary Fiscal Policy in that:          

Options          

  1. The former deals with government spending and the latter deals with tax policy
  2. The former is chosen by Congress while the latter is chosen by the President
  3. The former is always stabilizing, while the latter is never stabilizing           
  4. The former often takes years to enact, while the latter takes effect automatically

 

 

Question No.  37         Marks - 10

Replacement of a progressive income tax system with a single income tax rate would be an example of:  

 Options          

  1. Nondiscretionary fiscal policy
  2. Discretionary fiscal policy
  3. Mandatory spending policy  
  4. Interest rate policy

 

 

Question No.  38         Marks - 10

An example of discretionary fiscal policy would be:

Options          

  1. The operation of the welfare state
  2. The operation of the progressive federal income tax
  3. A tax cut adopted to stimulate consumption            
  4. An interest rate cut implemented to stimulate consumption

 

 

Question No.  39         Marks - 10

An example of discretionary fiscal policy would be:

 Options          

  1. The operation of the welfare state
  2. The operation of the progressive federal income tax
  3. A tax increase adopted to control inflationary pressures      
  4. An interest rate increase implemented to control inflationary pressures

 

 

Question No.  40         Marks - 10

An example of discretionary fiscal policy would be:

 Options          

  1. The existence of the welfare state
  2. The existence of the progressive federal income tax
  3. A federal jobs program adopted to stimulate consumption
  4. an interest rate cut implemented to stimulate consumption

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