SSC CGLEconomy

Taxation

1 SSC CGL Economy previous year questions on Taxation — options free on every question; 1 include the answer & explanation free, the rest unlock with PYQ Pass.

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PYQ

Which type of tax acts as an automatic stabiliser in the economy?

aProfessional tax

bWealth tax

cCapital gains tax

dProportional income tax

✓ Correct answer: d) Proportional income tax

ExplanationAn automatic stabilizer is a mechanism that helps to stabilize the economy without any deliberate government intervention.Proportional income tax is an automatic stabilizer because it automatically increases tax revenue when the economy expands and decreases tax revenue when the economy contracts.This is because proportional income tax is a tax that takes a fixed percentage of income, regardless of the level of income.When the economy expands, people's incomes increase, and so does the amount of tax revenue collected.When the economy contracts, people's incomes decrease, and so does the amount of tax revenue collected.Hence the correct answer is "D): Proportional income tax."

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