GyanGramA decrease in tax to GDP ratio of a country indicates which of the following? 1. Slowing economic growth rate…
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A decrease in tax to GDP ratio of a country indicates which of the following?
1. Slowing economic growth rates
2. Less equitable distribution of national income
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• Correct Answer: A
• Falling tax-to-GDP ratio indicates slowing economic growth, as tax revenues are elastic to GDP and formal sector activity.
• It reflects revenue mobilization weakness, not income distribution.
• B, C, D are wrong because the ratio does not measure equity or distribution; it is a macro fiscal indicator.
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