| A decrease in tax to GDP ratio of a country indicates which of the following? |
| 1. Slowing economic growth rate. |
| 2. Less equitable distribution of national income. |
| Select the correct answer using the codes given below. |
A) Only 1
B) Only 2
C) Both 1 and 2
D) Neither 1 nor 2
Correct Answer: B
Solution :
Exp. [b] A decrease in tax to GDP ratio of a country means less equitable distribution of national income. The ratio of tax collection against the national Gross Domestic Product (GDP) is tax to GDP ratio. This ratio is the total government tax collections divided by the country's GDP. An economic slowdown occurs when the rate of economic growth slows in an economy Countries usually measure economic growth in terms of GDP, which is the total value of goods and services produced in an economy during a specific period of time. Hence, option [b] is correct.
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