| Consider the following statements and identify the correct one: |
| 1. The ratio of proportionate change in tax revenue to proportionate change in GDP is known as tax Elasticity. |
| 2. The ratio of proportionate change in adjusted tax revenue to proportionate change in GDP is known as tax Buoyancy. |
| Select the correct answer using the codes given below: |
A) 1 only
B) 2 only
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: D
Solution :
[d] Tax buoyancy is an indicator to measure efficiency and responsiveness of revenue mobilization in response to growth in the Gross domestic product or National income. A tax is said to be buoyant if the tax revenues increase more than proportionately in response to a rise in national income or output.
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