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WAEC Economics 2020 Question 40

Question 40

Public Finance

During inflation, the appropriate fiscal measure to adopt is to

  1. A.increase indirect taxes.
  2. B.increase direct taxes.
  3. C.reduce personal income tax.
  4. D.increase government expenditure.
Show the answer and explanation

Answer: B (increase direct taxes.)

Explanation

Higher direct taxes cut disposable income and spending without directly raising prices.