Test Bank

Answer the following questions:

Question no. (1):

Define the following expressions:

1. Public finance.

2. The budget.

3. Externalities.

4. Public goods.

5. Congestible public goods.

6. Public choice.

7. Political externalities.

8. Tax shares (or tax prices).

9. Tax evasion.

Question no. (2):

Using graphs if it is possible, Compare between

Pure public good and pure private good.

Question no. (3):

Using graphs if it is possible, Compare between

Horizontal equity and vertical equity.

Question no. (4):

Using graphs if it is possible, Compare between

the marginal cost of consuming a pure public good

and a congestible public good.

Question no. (5):

Compare between positive and normative

economics.

Question no. (6):

Compare between public finance and private

finance.
Question no. (7):

Compare between fees and fines.

Question no. (8):

Compare between the advantages and

disadvantages of the direct taxes.

Question no. (9):

Compare between progressive and digressive

taxation.

Question no. (10):

Compare between a budget surplus and a budget

deficit.

Question no. (11):

Compare between tax capacity and tax pressure.

Question no. (12):

Compare between Union budget and state budget.

Question no. (13):

Compare between plan budget and performance

budget.

Question no. (14):

Compare between supplementary budget and

Zero-based budget.

Question no. (15):

What is the difference between supplementary

budget and plan budget?

Question no. (16):

Compare between internal loan and external loan.

Question no. (17):

Using graphs; illustrate the circular flow in the

mixed economy.

Question no. (18):

Using graphs; illustrate marginal conditions of

efficiency according to Pareto optimality.

Question no. (19):

Using graphs; illustrate the three cases in which

the market interactions fail to achieve efficiency.

Question no. (20):

Using graphs; illustrate the allocation between

private and government resources.

Question no. (21):

Using graphs; illustrate the balanced budget.

Question no. (22):

Using graphs; illustrate the idea of Laffer curve.

Question no. (23):

Using graphs; illustrate income redistribution

using Lorenz curve.

Question no. (24):

Using graphs; illustrate the corrective subsidies as

means of adjusting positive externalities.

Question no. (25):

Using graphs; illustrate the corrective taxes as

means of adjusting negative externalities.

Question no. (26):

Explain why most taxes impose an excess burden,

but lump-sum taxes do not. What is the main

disadvantage of lump-sum taxes?

Question no. (27):

Using graphs; illustrate negative externalities and

efficiency.

Question no. (28):

Using graphs; illustrate the difference between

demand for pure public good and pure private good.

Question no. (29):

Illustrate the stages of preparing state budget.

Question no. (30):

Illustrate the main characteristics of the public

goods.

Question no. (31):

Explain briefly the determinants of political

equilibrium.

Question no. (32):

Illustrate the objectives of public finance.

Question no. (33):

Explain briefly the three principles of public

finance.

Question no. (34):

Illustrate the relationship between public and

private finance.
Question no. (35):

Illustrate the factors affecting the tax capacity.

Question no. (36):

Explain the differences between direct and indirect

taxation.

Question no. (37):

Illustrate the different types of tax burden transfer.

Question no. (38):

Illustrate the disadvantages of direct taxation.

Question no. (39):

Define a negative production externality.

Question no. (40):

Why do markets not always manage to solve the

problem of externalities on their own?

Question no. (41):

Explain the intuition behind the shape of the Laffer

curve.

Question no. (42):

Explain why higher tax rates could decrease the

government revenue.

Question no. (43):

Illustrate the types of tax evasion.

Question no. (44):

Explain the means of fighting tax evasion.

Question no. (45):

What is the meaning of double taxation?

Question no. (46):

What are the features of public goods?

Question no. (47):

What are the Types of budgets?

Question no. (48):

Explain the budget preparation stages (the budget

cycle).

Question no. (49):

Explain the general principles of the budget

preparation.

Question no. (50):

Explain briefly the meaning of double taxation.

Question no. (51):

If the answer is correct, please mark (),

otherwise mark (), and justify your answer:

1. Prices and willingness to pay those prices are

applicable to goods such as national defense.

2. Price excludable public goods are rivalry but

not excludability goods.

3. When government gets bigger, it comes at the

expense of less public consumption.

4. Maximum Net Benefit occurs where MSB =

TSB.

5. A stable market is a reason in which

government intervention may be warranted.

6. The marginal cost of allowing another person

to benefit from a pure public good is positive

 while the marginal cost of a greater level of

public good is zero.

7. Freeriding occurs when people are honest in

stating their Marginal Benefit.

8. Freeriding is easier with the large numbers of

people.

9. There is no difference between price

excludable public goods and congestible

public goods.

10. Budget is a financial document that

includes only government revenue during the

fiscal year.

11. Fines are an important source of non-tax

revenue.

12. Fees are commercial non-tax revenues to

the Government.
13. Indirect taxes are imposed on goods and

services.

14. Direct taxes are imposed on goods and

services.

15. The burden of direct taxes cannot be

shifted.

16. The burden of indirect taxes cannot be

shifted.

17. Taxes on expenditure are regarded as

direct taxes.

18. Service tax is an example of direct tax.

19. If the price of a commodity did not rise

by the full amount of the tax, the consumer

would pay only a part of the tax.

20. In the case of commodities having

inelastic supply, the tax imposed on them can

be easily shifted to the buyers.

21. In the case of commodities having

elastic supply, the tax shifting is relatively

easier.

22. The taxation of necessary goods will

have regressive effects.

23. In the case of luxuries, the burden of tax

will be more on the producers.

24. Indirect taxes may be inflationary.

25. Indirect taxes guide resource allocation

in the economy.

26. In the case of indirect taxes, evasion is

relatively easy.
27. The tax will be economical if the cost of

collection is very small.

28. Income tax is a form of tax which is

levied on individual's total earnings.

29. The burden of a direct tax can be shifted

to anyone else.

30. Direct taxes refer to the type of tax

which is indirectly imposed on a person.

31. In direct tax, the burden can be shifted.

32. In indirect tax, the burden can be shifted

to another person.

33. Direct taxes are regressive in nature.

34. The government borrows money when it

issues treasury bills.

35. Direct taxes are progressive in nature.

36. If the economy have been operating at

full employment, it would be probably better

to finance government purchases by taxes.

37. Indirect taxes are regressive in nature.

38. Increased government spending financed

by government borrowing creates greater

expansion of the economy than if the

increased government spending is financed by

increased taxes.

39. Indirect taxes are progressive in nature.

40. Direct taxes help to reduce inequalities.

41. Expenditure on defense, law and order

maintenance and public administration

expenses are unproductive expenditure.

42. Expenditure on economic services like

agriculture is a part of non-development

expenditure.

43. A balanced budget is one in which

public revenue equals public expenditure.

44. The government borrows fund from

domestic market and foreign governments to

meet expenditure on its various activities.

45. Government borrowing within the

country is known as external debt.

46. Internal debt creates more burden than

external debt.

47. The knowledge that a Beni-Suef student

won a scholarship this year is a public good.

 48. A progressive tax is one that takes a

larger percentage of income from low-income

people than from high-income people.

49. The total amount of money that the

government has borrowed and not yet repaid

is the national debt.

50. The total amount of money that the

government has borrowed and not yet repaid

is the budget deficit.

Question no. (52):

Suppose that the net domestic income, the

consumption, the investment, and the government

expenditure as follow:

net
Desired Desired Government
domestic
consumption Investment Spending
income
 90 92 20 50
100 95 20 50
110 98 20 50
120 100 20 50
130 103 20 50
140 105 20 50
150 107 20 50
160 110 20 50
170 112 20 50
180 115 20 50
190 120 20 50
200 125 20 50

Calculate:

a) The equilibrium without government

spending.

b) The equilibrium with government spending.

Question no. (53):

Suppose that the net domestic income, the

consumption, the investment, and the government

expenditure as follow:

net
Desired Desired Government
domestic
consumption Investment Spending
income
90 92 15 100
110 95 15 100
115 98 15 100
120 100 15 100
130 103 15 100
140 105 15 100
150 107 15 100
160 110 15 100
170 112 15 100
180 115 15 100
200 120 15 100
240 125 15 100
Calculate:

a) The equilibrium without government

spending.

b) The equilibrium with government spending.

Question no. (54):

Suppose that the net domestic income, the

consumption, the investment, and the government

expenditure as follow:

net
Desired Desired Government
domestic
consumption Investment Spending
income
50 80 55 200
90 90 55 200
115 95 55 200
155 100 55 200
220 103 55 200
250 105 55 200
 305 107 55 200
365 110 55 200
390 115 55 200
400 150 55 200
420 170 55 200
450 190 55 200

Calculate:

a) The equilibrium without government

spending.

b) The equilibrium with government spending.

Question no. (55):

If a country has consumption function as follow:

𝐶 = 200 + 0.75 𝑌𝐷
and has fixed investment 40 million, fixed

government spending 60 million, and lump-sum tax

20 million. Calculate the NDI and saving.

Suppose that the government want to increase the

net domestic income NDI by 200 million, which

methods will be more effective?

Question no. (56):

If a country has consumption function as follow:

𝐶 = 1500 + 0.6 𝑌𝐷

and has fixed investment 200 billion, fixed

government spending 250 billion, and lump-sum tax

80 billion.

a) Calculate the NDI and saving.

 b) Suppose that the government want to increase

the net domestic income NDI by 1000 billion,

which methods will be more effective?

Question no. (57):

If a country has consumption function as follow:

𝐶 = 900 + 0.9 𝑌𝐷

and has fixed investment 400 billion, fixed

government spending 300 billion, and lump-sum tax

120 billion.

a) Calculate the NDI and saving.

b) Suppose that the government want to increase

the net domestic income NDI by 1000 billion,

which methods will be more effective?

Question no. (58):

If a country has consumption function as follow:

𝐶 = 3000 + 0.75 𝑌𝐷

and has fixed investment 600 billion, fixed

government spending 550 billion, and lump-sum tax

100 billion.

a) Calculate the NDI and saving.

b) Suppose that the government want to increase

the net domestic income NDI by 500 billion,

which methods will be more effective?

Question no. (59):

If a country has consumption function as follow:

𝐶 = 90 + 0.8 𝑌𝐷
and has fixed investment 100 billion, fixed

government spending 80 billion, and lump-sum tax

20 billion.

a) Calculate the NDI and saving.

b) Suppose that the government want to increase

the net domestic income NDI by 150 billion,

which methods will be more effective?

Question no. (60):

If you had the following data:

Planned investment 200 million, government

expenditure 300 million, the tax function

represented as follows:

𝑇 = 50 + 0.20 𝑌
and the consumption function is represented as

follows:

𝐶 = 200 + 0.75 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 40 million.

c) Determine the budget position.

Question no. (61):

If you had the following data:

Planned investment 1500 million, government

expenditure 900 million, the tax function

represented as follows:
 𝑇 = 200 + 0.3 𝑌

and the consumption function is represented as

follows:

𝐶 = 1000 + 0.8 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 100 million.

c) Determine the budget position.

Question no. (62):

If you had the following data:

Planned investment 200 billion, government

expenditure 110 billion, the tax function represented

as follows:

𝑇 = 40 + 0.4 𝑌

and the consumption function is represented as

follows:

𝐶 = 150 + 0.8 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 15 billion.

c) Determine the budget position.

Question no. (63):

If you had the following data:

Planned investment 650 billion, government

expenditure 150 billion, the tax function represented

as follows:

𝑇 = 80 + 0.3 𝑌

and the consumption function is represented as

follows:

𝐶 = 220 + 0.75 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 100 billion.

c) Determine the budget position.

Question no. (64):

If you had the following data:

Planned investment 3000 million, government

expenditure 500 million, the tax function

represented as follows:

𝑇 = 50 + 0.15 𝑌

and the consumption function is represented as

follows:

𝐶 = 900 + 0.6 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 500 million.

c) Determine the budget position.

Question no. (65):

Suppose we have three people who are discussing

the issue of hiring security guards; the following

table shows the marginal benefits of them and its

corresponding number of security guards could be

hired:

Number of Security Guards per Week

1 2 3 4
MBA
$300 $250 $200 $150
MBB
$250 $200 $150 $100
MBC
$200 $150 $100 $50

Determine the optimal number of security guards

must be hired, assuming that the cost of security

guards is $450 per week.

Question no. (66):

Suppose we have three people who are discussing

the issue of hiring teachers; the following table

shows the marginal benefits of them and its

corresponding number of teachers could be hired:

Number of teachers per Week

1 2 3 4
MBA
$500 $300 $100 $150
MBB
$300 $150 $200 $100
MBC
$300 $400 $200 $100

Determine the optimal number of teachers must be

hired, assuming that the cost of teachers is $500 per

week.
Question no. (67):

Suppose we have three people who are discussing

the issue of hiring new waiters; the following table

shows the marginal benefits of them and its

corresponding number of waiters could be hired:

Number of waiters per Week

1 2 3 4
MBA
$1200 $900 $1100 $800
MBB
$1000 $950 $900 $950
MBC
$1050 $1000 $1000 $850

Determine the optimal number of waiters must be

hired, assuming that the cost of waiters is $1000 per

week.
Question no. (68):

1. Let's assume we are to receive $100 at the end

of two years. How do we calculate the present

value of the amount, assuming the interest

rate is 8% per year compounded annually?

2. Calculate the present value of receiving a

single amount of $1,000 in 20 years. The

interest rate for discounting the future amount

is estimated at 10% per year compounded

annually.

3. What is the present value of receiving a single

amount of $5,000 at the end of three years, if

the time value of money is 8% per year,

compounded quarterly?

Hint:

𝐏𝐫𝐞𝐬𝐞𝐧𝐭 𝐯𝐚𝐥𝐮𝐞 = [𝒇𝒖𝒕𝒖𝒓𝒆 𝒗𝒂𝒍𝒖𝒆 ÷ (𝟏 + 𝒓)𝒏 ]

Question no. (69):

Choose the right answer from the following:

(1) The tax on net income of companies is

a. Personal income tax

b. Indirect tax

c. Wealth tax

d. Corporation tax

(2) Fiscal Policy is related to

a. Money supply

b. Regulation of the banking system

c. Planning for economic development

d. Government's Revenue and Expenditure

(3) Monetary Policy is related to

a. Money supply

b. Managing foreign trade

c. Planning for economic development

d. Government's Revenue and Expenditure

(4) The objective of taxation by the Government

are

a. Raising revenue for the state

b. To maintain economic stability

c. To remove disparities in the distribution of

income

d. All of the above

(5) Which of the following is not a direct tax?

a. Personal Income Tax

b. Service tax

c. Wealth Tax

d. Corporate Income Tax

(6) On what broad aspect of commodities are

indirect taxes imposed?

a. Production

b. Sales

c. Movement

d. All of the above

(7) Which factor has no role in the shifting of a

tax?

a. Change in prices

b. Elasticity of demand and supply

c. Nature of Demand

d. Income of the consumer

(8) Pick out the incorrect statement.

a. In the short period, shifting of a tax is easy.

b. In the long period shifting of a tax is easy.

c. When supply is elastic, shifting is easy.

d. None of the above.

(9) Pick out the factor which is not a feature of

indirect taxes.

a. Convenience

b. Tax evasion is difficult

c. Fair to the poor

d. Powerful tool of economic policy

(10) Which of the following is not a direct tax?

a. Income tax

b. wealth tax

c. gift tax

d. service tax

(11) The main objective of taxation is to

a. Raise revenue to the Government

b. to promote exports

c. increase inequalities of income

d. promote employment)

(12) The main objective of taxation is to

a. Obtain revenue to the Government

b. check harmful consumption

c. promote investment

d. check savings

(13) Which of the following is not an indirect

tax?

a. Sales tax

b. custom duty

c. excise duty

d. gift tax

(14) An example of direct tax is

a. Sales tax

b. Central excise duty

c. Custom duty

d. Wealth tax

(15) Generally, the nature of indirect tax is

a. Progressive

b. Regressive

c. Proportional

d. None of the above

(16) Generally, the nature of direct tax is

a. Progressive

b. Regressive

c. Proportional

d. None of the above

(17) An increase in the direct tax means it is

a. Inflationary

b. Anti-inflationary

c. Having no impact on price

d. None of the above

(18) The shared burden of taxation on consumer

and producer implies

a. Inelastic Supply and Elastic Demand

b. Elastic Supply and Demand

c. Inelastic Supply and Demand

d. Elastic Supply and Inelastic Demand

(19) Which of the following is not true of public

budget?

a. A budget contains only proposals of taxation.

b. It refers to the policies of the government.

c. It contains the estimated receipts and proposed

expenditure.

d. It reflects the programs of the government.

(20) Public Expenditure refers to

a. Government Expenditure

b. Private Expenditure

c. Private Expenditure

d. None of the above

(21) The major objectives of public expenditure

are

a. Economic Growth

b. Maintenance of infrastructure
c. Social Welfare

d. All of the above

(22) Consider replacing the current Egyptian tax

system with a proportional tax in which everyone

would pay a constant fraction of their wages, and

there would be no other taxes. Compared to the

current personal tax system:

(a) The proportional tax would increase the

amount of personal saving.

(b) The proportional tax would make the tax

system less progressive than it is now.

(c) The proportional tax would increase the

number of hours people work.

(d) All of the above

(e) None of the above

(23) The incidence of a tax relies on

(a) The elasticity of demand in the market

(b) The market structure (competition,

monopoly)

(c) The production function for the good

(d) All of the above

(e) None of the above

(24) Government securities consist of

a. the reserve system.

b. government bonds and treasury bills.

c. corporate bonds and stocks.

d. All of the above.

(25) A tax base is

a. always expressed as a percentage.

b. always expressed as some form of income.

c. an item that has a tax credit applied to it.

d. an item that has a tax rate applied to it.

(26) A decrease in personal income taxes will

raise

a. disposable income.

b. consumption spending.

c. aggregate demand.

d. all of the above

(27) Which of the following is a regressive tax

a. sales tax

b. property tax

c. social security tax

d. all of the above

(28) A regressive tax:

a. takes a larger amount of tax dollars from low

income people than high income people

b. takes a larger percentage of income from low

income people than from high income people.

c. takes a larger percentage of income from high

income people than from low income people.

d. takes the same percentage of income from

high income people than from low income

people.

(28) A progressive tax:

a. takes a larger amount of tax dollars from low

income people than high income people

b. takes a larger percentage of income from low

income people than from high income people.

c. takes a larger percentage of income from high

income people than from low income people.

d. takes the same percentage of income from

high income people than from low income

people.

(29) Which causes greater expansion of the

economy?

a. an increase in taxes only

b. an increase in government spending financed

by an increase in taxes

c. an increase in government spending financed

by government borrowing
d. a and b are equal

(30) Increased government spending financed by

government borrowing will generally cause:

a. an increase in interest rates.

b. an expansion of the economy.

c. Inflationary effect.

d. all of the above

(31) Government tax revenue of $200 billion and

government spending of $180 billion in any

given year results in:

a. a budget deficit of $20 billion.

b. a budget surplus of $20 billion.

c. a national debt of $20 billion.

d. a national surplus of $20 billion.

(32) Government tax revenue of $200 billion and

government spending of $220 billion in any

given year results in:

a. a budget deficit of $20 billion.

b. a budget surplus of $20 billion.

c. a national debt of $20 billion.

d. a national surplus of $20 billion.

(33) The difference between government

spending and government revenue in a specific

year is:

a. the budget deficit/surplus

b. the national debt

c. Inflationary effect

d. the trade deficit/surplus

Question no. (70):

Using the following graphs show the effects of

the following on GDP:

a. Increased government spending on

infrastructure financed by government

borrowing.

Q
b. Increased government spending on

infrastructure financed by increased taxes.

P D S

c. Using corrective tax as a mean to adjust

negative externalities.

P D S

Q
 d. Using corrective subsidies as a mean to

adjust positive externalities.

P D S

Question no. (71):

Given the following Table:

Tax rate Value

0 0

50 20

150 40

250 60
 350 80

450 100

550 80

650 60

750 40

850 20

950 0

What do you conclude from this Table? Use graphs

to illustrate your answer.

Question no. (72):

Use the following Table to prove the idea of Laffer

curve.

Tax rate Value

0 0

100 50
 200 100

300 150

400 200

500 250

600 200

700 150

800 100

900 50

1000 0

Question no. (73):

Discuss the various sources of public revenue.

Question no. (74):

Discuss the advantages and disadvantages of direct

taxes.
Question no. (75):

Discuss the advantages and disadvantages of

indirect taxes.

Question no. (76):

Explain the term shifting of a tax with the help of an

example.

Question no. (77):

What are the factors which affect the shifting of a

tax?

Question no. (78):

Explain the various objectives of taxation.

Question no. (79):

Explain the various classification of tax revenue.

Question no. (80):

Distinguish between the direct and indirect tax

based on its advantages and disadvantages.

Question no. (81):

Distinguish between the forward and backward

shifting of tax.

Question no. (82):

Write explanatory note on cash or payment burden

and real burden.

Question no. (83):

From your point of view, explain the role of direct

and indirect taxes in a developing economy.

Question no. (84):

Explain the various types of public expenditure.

Question no. (85):

Explain the various causes of increasing public

expenditure.

Question no. (86):

What is public debt? What are its different types?

Question no. (87):

Discuss briefly the public debt management in

Egypt.

Question no. (88):

Discuss the burden of public debts in Egypt.

Question no. (89):

Discuss the internal and external burden of debt.

From your point of view, does debt burden create an

impact on future generations?

Question no. (90):

Explain the concept of public debt and its various

types.

Question no. (91):

Discuss in details the differences between

regressive, proportional, and progressive taxes?

Question no. (92):

What is the difference between internal and external

debt?

Question no. (93):

How does a regressive income tax differ from a

proportional tax and a progressive tax? Which type

of tax is the fairest? Why?

Question no. (94):

State whether the following statements are true

(T) or false (F). Justify your answer.

1. Permanent loans are loans in which the state

determines in prior their payment deadline.

2. Laffer curve is called a perfect unequal

distribution line.

3. Unified budget is one in which public revenue

is greater than public expenditure.

4. According to Laffer curve the tax revenue

decreases with increasing tax rate.

5. According to Lorenz curve the tax revenue

increases with increasing tax rate, then

decreases after reaching the maximum point.

6. Price excludable public goods are both non-

rivalry and excludability goods.

7. There is no reason for government

intervention in the market.

8. The marginal cost of allowing another person

to benefit from a pure public good is zero

while the marginal cost of a greater level of

public good is negative.

9. There is no difference between price non-

excludable public goods and congestible

public goods.
10. Budget is a financial document that

includes government revenue and government

expenditure during the fiscal year.

11. Fees are an important source of tax

revenue.

12. Fines are commercial non-tax revenues

to the Government.

13. The burden of sales taxes cannot be

shifted.

14. The burden of income taxes can be

shifted.

15. Taxes on property are regarded as direct

taxes.

16. Sales tax is an example of indirect tax.

17. If the price of a commodity did not rise

by the full amount of the tax, the producer

would pay the tax.

18. In the case of commodities having

elastic supply, the tax imposed on them cannot

be shifted to the buyers.

19. In the case of commodities having

inelastic demand, the tax shifting is relatively

easier.

20. The taxation of luxuries will have

regressive effects.

21. In the case of necessary goods, the

burden of tax will be more on the producers.

22. Direct taxes may have an inflationary

effect.
23. In the case of direct taxes, evasion is

relatively easy.

24. The tax would not be economical if the

cost of collection is very small.

25. Tax on property is a form of tax which is

levied on individual's total assets.

26. Indirect taxes refer to the type of tax

which is directly imposed on a person but

collected indirectly.

27. The government lends money when it

issues government securities.

28. If the economy have been operating at

full employment, it would be probably better

to finance government purchases by

borrowing.
29. Increased government spending financed

by increased taxes creates inflationary effect

in the economy than if the increased

government spending is financed by

government borrowing.

30. Indirect taxes help to reduce inequalities.

31. Expenditure on law and order are

productive expenditure.

32. The total amount of money that the

government has borrowed and not yet repaid

is the budget surplus.

33. Expenditure on establishing

infrastructure is a part of non-development

expenditure.
34. Contemporary loans are loans in which

the state concludes without determining a

payment deadline.

35. The government cannot borrow money

from foreign governments and international

organizations to meet its own domestic

expenditure.

36. Government borrowing within the

country is known as internal debt.

37. Internal debt creates fewer burdens than

external debt.

38. A regressive tax is one that takes a

smaller percentage of income from low-

income people than from high-income people.

39. Prices and willingness to pay those

prices are applicable to any kind of goods.

40. Maximum Net Benefit occurs where

MSB > TSB.

41. Preparation and passing of the budget

may have to be done more than once in a year.

42. A supplementary budget is considered

during periods of war or natural crisis.

43. Expenditure on justice and police is a

part of developmental expenditure.

44. Treasury bills constitute major source of

long term fund.

45. Public debt policy has no connection to

economic stability and growth.

46. Growth of towns, cities, and villages are

another cause of concern to the huge amount

of public expenditure.
47. During recent years, public debt in

Egypt has been growing at an alarming rate.

48. Tax capacity and tax pressure are the

same.

49. Tax pressure expresses the society's

potential ability of bearing taxes.

50. Tax pressure could be less than or equal

to tax capacity but never exceeds tax capacity.

51. External debt is private debt and internal

debt is public debt.

52. If the government raises interest rates on

the securities that it sells, government debt

may crowd out private investment.

53. The size of government intervention

could be measured by only one measure which

 is the number of the workers in the public

sector.

Question no. (95):

Re-write the statement after choosing the

appropriate answer:

(1) Which of the following is not true about

public budget?

a. A budget contains only proposals of taxation.

b. It refers to the policies of the government.

c. It contains the estimated receipts and

proposed expenditure.

d. It reflects the programs of the government.

(2) The defense expenditure minimizes the

possibility of
a. External threats

b. Internal threats

c. Terrorism

d. All of the above

(3) External debts can be raised from

a. Individuals

b. The central bank

c. Commercial Banks

d. World Bank

(4) The treasury bills are issued by the central

bank of Egypt on behalf of the government

a. Short-term public debt

b. Medium-term public debt

c. Long-term public

d. None of the above

(5) The tax levied by the Egyptian government

on income of individuals is known as

a. Personal income tax

b. Interest tax

c. Wealth tax

d. Corporation tax

(6) The tax levied by the Egyptian government

on net income of companies is

a. Personal income tax

b. Interest tax

c. Wealth tax
d. Corporation tax

(7) The difference between total expenditure

and total revenue is

a. Fiscal deficit

b. Budget deficit

c. Expenditure deficit

d. Revenue deficit

(8) A pure private good is subject to

a. Exclusion

b. Non exclusion

c. High satisfaction

d. None of the above

(9) A pure public good is subject to

a. Exclusion

b. Non exclusion

c. High satisfaction

d. None of the above

(10) Which of the following is not a fiscal

policy instrument?

a. Taxation

b. Public expenditure

c. Money supply.

d. None of the above.

(11) A decrease in tax rate when tax base

expands is considered

A. Regressive taxation
b. Progressive taxation

c. Proportional taxation

d. None of the above

(12) Consider the following taxes:

1) Personal income tax 2) Import duty

3) Service tax

Which of the taxes given above are Indirect

Taxes?

a. 1 and 2

b. 2 and 3

c. 2 and 3

d. Only 3

(13) A regressive income tax is one where the

poor people
a. have a lower percentage of their income

taxed than the rich

b. pay a larger amount in taxes than the rich

c. pay a tax that varies directly with their

income

d. have a higher percentage of their income

taxed than the rich

(14) The level of external debt rises when the

government of Egypt

a. prints more money

b. sells securities to the people of Egypt

c. sells securities to foreigners

d. None of the above

(15) Government tax revenue of $300 billion and

government spending of $100 billion in any

given year results in:

a. a budget deficit of $200 billion.

b. a budget surplus of $200 billion.

c. a national debt of $200 billion.

d. a national surplus of $200 billion.

(16) All of the following are examples of

regressive taxes except

a. Sales taxes

b. The proportional income tax

c. Customs duties

d. None of the above

(17) The national debt is a burden to future

generations to the extent that a portion of the

debt is held by

a. Government institutions

b. Foreigners

c. National banks

d. All of the above

(18) A progressive income tax is one in which

a. Everyone pays the same rate

b. Everyone pays a fixed amount

c. The poor people pay a larger percentage of

their income than do the rich

d. The rich people pay a larger percentage of

their income than do the poor

(19) Deficit financing is most likely to be

 inflationary when the debt is purchased by

a. The public

b. Foreigners

c. State governments

d. Private banks

(20) The primary source of revenue for general

spending by the government of Egypt is

a. Property taxes

b. Income taxes

c. Custom duties

d. Tariff revenues

Question no. (96):

(1) Match the terms on the left with the

definitions in the column on the right.

 Tax  The taxpayer's income,

Capacity regardless of its varied

sources.

 Tax  The sums of money which

pressure the state forcibly deducts to

finance its needs.

 Direct  Expresses the society's

taxation actual ability of bearing

taxes

 Indirect  The taxes imposed on the

taxation consumption and customs

taxes

 Unified  The taxes imposed on the

taxes income and capitals

 Tax  Expresses the society's

potential ability of bearing

 taxes.

(2) Match the terms on the left with the

definitions in the column on the right.

 Public  Inability to prevent the

expenditure goods from consuming by

others.

 Tax burden  The sums of money spent

transfer by a general legal person

for the purpose of

achieving public benefit.

 External  The difference between

debt dwelt production and

necessary consumption.

 Internal loan  Another person rather

than entitled tax paying

person can bear the tax.

 Non-  A loan which the state

exclusion concludes in the foreign

markets.

 Economic  A loan which the state

surplus concludes within its

territories.

(3) Match the terms on the left with the

definitions in the column on the right.

 Direct Tax  Expresses the society's

actual ability of bearing

taxes.

 Tax  The sums of money spent

Capacity by a general legal person

for the purpose of

achieving public benefit.

 External  A loan which the state

debt concludes within its

territories.

 Internal loan  A loan which the state

concludes in the foreign

markets.

 Tax pressure  The taxes imposed on the

income and capitals.

 Public  Expresses the society's

expenditure potential ability of bearing

taxes.

(4) Match the terms on the left with the

definitions in the column on the right.

 Tax burden  Inability to prevent the

transfer goods from consuming by

 others.

 Public debt  Financial document

includes all government

revenues and

expenditures.

 Public  The difference between

finance dwelt production and

necessary consumption.

 Public  Another person rather

budget than entitled tax paying

person can bear the tax.

 Non-  The total loans obtained

exclusion by the state from internal

and external loans.

 Economic  Study of the public

surplus authorities' income,

 expenditures and their

balance.

Question no. (97):

Read the following statement carefully and write

a suitable comment:

(1) "The higher the individual's average income,

the more the tax capacity is."

(2) "Tax capacity is affected by the pattern of

national income distribution among the

individuals."

(3) "Tax pressure could be less than or equal to

tax capacity but never exceeds tax capacity."

(4) "Tax is imposed on all personalities in the

society, individuals, companies, corporations,

banks, etc."
(5) "Taxes can be divided into four categories."

(6) "Tax evasion is a phenomenon by which a

taxpayer tries to evade paying part or whole

of tax that he has to pay by using different

means."

(7) "Double taxation could be either internal or

external."

(8) "Revenue of financial fees has a great

importance as a source of revenue."

(9) "Public loans are one of the most important

unordinary sources of revenue."

(10) "Public goods are goods for which exclusion

is impossible."

(11) "The marginal cost of allowing another

person to benefit from a pure public good

 equals zero while the marginal cost of a

greater level of public good is positive."

(12) "There are public goods where, after a point,

the enjoyment received by the consumer is

reduced by crowding or congestion."

(13) "The socially optimal level of the public

good requires that the marginal social benefit

of that good equals to its marginal social

cost."

(14) "The efficiency condition for a pure public

good is 𝑀𝑆𝐵 = ∑ 𝑀𝐵 = 𝑀𝑆𝐶"

(15) "Externalities can be negative or positive."

(16) "When a positive externality occurs, marginal

private benefit will fall short of marginal

social benefit at each level of annual

production."
(17) "Corrective tax is considered to adjust the

marginal private cost of good or service in

such a way as to overcome the externality."

(18) "A corrective subsidy is a payment made by

government to either buyers or sellers of a

good so that the price paid by consumers is

reduced."

(19) "One of the most important basic principles

of the public budget is to issue a fiscal year

with its resources and expenditures."

(20) "The general principles of the budget

preparation are annual budget, inclusion

budget, prevalence of the budget, unity of the

budget, and balancing the budget."

(21) "The budget divisions mean the different

ways in which the expenses and revenue are

 presented to the parliament in order to

identify its structure."

(22) "According to the legal standard, the nature

of the expenses is determined on the basis of

the party that is making the expenditures."

(23) "According to career standard, the tunnel is

considered to be general if it is carried out by

the state under its sovereignty."

(24) "Transfer expenses occur when cash is

transferred from one category to another in

the community."

(25) "There are two different measures for the size

of government intervention."

Question no. (98):

Suppose we have five people who are discussing the

issue of hiring new servants; the following table

shows the marginal benefits of them and its

corresponding number of servants could be hired:

Number of servants per Week

1 2 3 4
MBA
$1200 $900 $1100 $800
MBB
$1000 $950 $900 $950
MBC
$1050 $1000 $1000 $850
MBD
$950 $1000 $1050 $1000
MBE
$1100 $800 $1000 $1000
Determine the optimal number of servants must be

hired, assuming that the cost of servants is $1000

per week.

Question no. (99):

Suppose we have four people who are discussing

the issue of hiring new servants; the following table

shows the marginal benefits of them and its

corresponding number of servants could be hired:

 Number of servants per Week

1 2 3 4
MBA
$2000 $3000 $3500 $5500
MBB
$1500 $2500 $2000 $2400
MBC
$3050 $3200 $2900 $3000
MBD
$2500 $2500 $2800 $2900
Determine the optimal number of servants must be

hired, assuming that the cost of servants is $2000

per week.

Question no. (100):

If you had the following data:

Planned investment 30 billion, government

expenditure 10 billion, the tax function represented

as follows:

𝑇 = 110 + 0.20 𝑌
and the consumption function is represented as

follows:

𝐶 = 50 + 0.8 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 50 billion.

c) Determine the budget position.

Question no. (101):

If you had the following data:

Planned investment 800 billion, government

expenditure 700 billion, the tax function represented

as follows:

𝑇 = 35 + 0.5 𝑌
and the consumption function is represented as

follows:

𝐶 = 1200 + 0.85 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 250 billion.

c) Determine the budget position.

Question no. (102):

If a country has consumption function as follow:

𝐶 = 12000 + 0.65 𝑌𝐷
and has fixed investment 10000 million, fixed

government spending 5500 million, and lump-sum

tax 3000 million.

a) Calculate the NDI and saving.

b) Suppose that the government want to increase

the net domestic income NDI by 3000 million,

which methods will be more effective?

Question no. (103):

If a country has consumption function as follow:

𝐶 = 45 + 0.75 𝑌𝐷

and has fixed investment 15 billion, fixed

government spending 10 billion, and lump-sum tax

2 billion.

a) Calculate the NDI and saving.

 b) Suppose that the government want to increase

the net domestic income NDI by 5 billion,

which methods will be more effective?

Question no. (104):

Suppose that the net domestic income, the

consumption, the investment, and the government

expenditure as follow:

net
Desired Desired Government
domestic
consumption Investment Spending
income
1500 1000 1200 1000
1900 1100 1200 1000
2300 1200 1200 1000
2500 1300 1200 1000
2700 1400 1200 1000
3000 1500 1200 1000
3200 1600 1200 1000
3500 1700 1200 1000
 3700 1800 1200 1000
4000 1900 1200 1000
4200 2000 1200 1000
4500 2100 1200 1000
Calculate:

a) The equilibrium without government

spending.

b) The equilibrium with government spending.

Question no. (105):

Suppose that the net domestic income, the

consumption, the investment, and the government

expenditure as follow:

net
Desired Desired Government
domestic
consumption Investment Spending
income
140 100 120 100
200 110 120 100
 230 120 120 100
250 130 120 100
280 140 120 100
300 150 120 100
320 160 120 100
350 170 120 100
370 180 120 100
400 190 120 100
420 200 120 100
450 210 120 100
Calculate:

a) The equilibrium without government

spending.

b) The equilibrium with government spending.

Question no. (106):

If you had the following data:

Planned investment 600 million, government

expenditure 600 million, the tax function

represented as follows:

𝑇 = 60 + 0.45 𝑌

and the consumption function is represented as

follows:

𝐶 = 135 + 0.8 𝑌𝐷

a) What is the equilibrium level of income and

tax?

b) Use different ways to achieve the goal of the

government if it wanted to increase the

equilibrium by 600 million.

c) Determine the budget position.