Explanation:

Correct Option: (d) Explanation:  All statements are correct Supplementary notes: Fiscal Drag:  It is an economic term whereby in fl ation or income growth moves taxpayers into higher tax brackets. This in effect increases government tax revenue without actually increasing tax rates.  The increase in taxes reduces aggregate demand and consumer spending from taxpayers as a larger share of their income now goes to taxes, which leads to de fl ationary policies, or drag, on the economy.  Fiscal drag can be seen as an automatic fi scal stabilizer as it controls a rapidly expanding economy from overheating. Progressive taxation  A progressive tax is based on the taxpayer’s ability to pay. It imposes a lower tax rate on low-income earners than on those with a higher income. This is usually achieved by creating tax brackets that group taxpayers by income ranges. The Indian income tax system is an example.  A regressive tax imposes the same rate on all taxpayers, regardless of ability to pay. A service tax is an example.  Progressive taxation, whereby individuals are moved into higher tax brackets because of in fl ation or increased income, is a fi scal policy that results in fi scal drag.  The rationale for a progressive tax is that a fl at percentage tax would be a disproportionate burden for people with low incomes. The rupee amount owed may be smaller, but the effect on their real spending power is greater.