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Public Finance And Policy(Buss 346) Question Paper

Public Finance And Policy(Buss 346)

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2010

TIME : 2 HOURS
INSTRUCTIONS Answer Question ONE and any Other TWO Questions

Question 1
a) Write short notes on the following
i) Buoyancy and elasticity of tax (2marks)
ii) Public receipt and public revenue (2marks)
iii) Tax Evasion and Tax avoidance (2marks)
iv) Forward shifting and Backward shifting of tax burden (2marks)
b) Before the tax authorities finally settle for the main source of public revenue, they must consider the taxable capacity of the tax payers. Describe four factors that determine the taxable capacity (4marks)
c) Every financial year the government must borrow to meet budget deficit thus incurring debts. Explain the justification of increased debt in Kenya (4marks)
d) Using a diagram explain the principle of maximum social advantage (10marks)
e) With examples differentiate between pure public goods and pure private goods (4marks)

Question 2
a) Explain the ways in which the Wagner`s law differs from the wiseman`s peacock philosophy of increasing public expenditure within the Kenyan context and briefly highlight the limitations of each philosophy (10marks)
b) Describe the canons or the principles of taxation (10marks)

Question 3
a) The role of a budget has over the years changed from a purely financial exercise to a vehicle of achieving public goals. Explain this using the goals of a modern budget (10marks) b) Demonstrate how taxes and subsides affect incentives and how they can prevent competitive markets from achieving efficient outcomes (5marks)
c) Explain the merits of direct taxes in an economy (5marks)

Question 4
a) Explain the reasons of government involvement in economic functions (6marks)
b) How can the corporate income tax administered in Kenya affect the choice between equity and debt financing (4marks)

Question 5
a) A progressive tax system has more good than harm in a country`s economy. Discuss this statement citing relevant Kenyan examples (10marks)
b) What is tax yield and state reasons why it is low in most developing countries relative to developing economies (6marks)
c) According to Adam Smith good taxation must be guided by four principles. Explain them (4marks)

Public Finance And Policy(Buss 346) Question Paper

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