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The Case:


Public revenues are received by Government from different sources like taxes (income and sales tax), administrative activities which include fines, fees, grants and gifts etc. Furthermore, it is an important tool of the fiscal policy and is the opposite factor of government expenditures. Government need to perform various functions in the field of political, social and economic activities to maximize social and economic welfare. In order to run the economy in a better way, government needs to have a large amount of revenues. As tax payers are major contributors of public revenues, if we categorize the tax payers according to their percentage of tax paid we will find that the richest pays more and the poorest pays less. Suppose last year total income tax revenue was 700 billion collected from all different income groups.


Given below, the categories of income groups with percentage of each category in population and their total income tax revenue.




Percentage of each category in population

Pays (Total Income tax revenue)

The richest


57% (399 billion)

The middle class


25% (175 billion)

The lower middle class


13% (91 billion)

The bottom (poor)


5% (35 billion)














Keeping in view the above case analyze that how a decrease of one percent in income tax by government will affect the revenue and its contribution towards economic welfare? Explain logically

Important Instruction:


Write to the point and precise answer. Avoid irrelevant and extra details.

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Replies to This Discussion

Which lecture is related to this GDB? anybody know that?

please do share some ideas of that GDB. :(

Yaar koi to concept clear karo...Ki bol e nahi raha.

this question is related to 26th lesson:

• Tax multiplier is negative: A tax hike reduces consumer spending, which reduces
• Tax multiplier is greater than one (in absolute value): A change in taxes has a
multiplier effect on income.
• Tax multiplier is smaller than the govt. spending multiplier: Consumers save the
fraction (1-MPC) of a tax cut, so the initial boost in spending from a tax cut is smaller
than from an equal increase in G.

discussion plzzzzzz

Read chapter # 10(role of govt) chapter #15 (fiscal policy home) chapter#26 (tax multiplier)

Also watch lecture videos for better understanding

is ko calculate to nai na kerna?

10 and 15 lectures are useless to read for this GDB issue...

 Govt. decrease income tax so revenue increase and increase economic welfare.
I'm right or wrong ? 

yes u are right

govt. revenue kam hojayega na tax kam krne se ?

kam bhi ho sakta hai aur barh bhi sakta hai kyun k jub tax kum hoga toh public ki disposable income barhegi aur jub disposable income barhegi toh consumption barhegi aur consumption barhegi toh sales increase hongi aur sales increase hongi toh more employment hogi aur jub more employment hogi toh more salaries aur more tax revenue generate hoga


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