Statement 1 The effects of an income tax on consumption saving and investment are micro effects Stat...........

Indian Economy Budgeting and Fiscal policy

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Statement (1): The effects of an income tax on consumption, saving and investment are micro effects

Statement (II): Income tax is an example of direct tax.

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EPFO APFC (2015)

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Both Statement (1) and Statement (II) are individually true and Statement (II) is the correct explanation of Statement (1)

Both Statement (1) and Statement (II) are individually true but Statement (II) is not the correct explanation of Statement (1)

Statement (I) is true but Statement (II) is false

Statement (I) is false but Statement (II) is true

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Explanation:

- Statement (1): The effects of an income tax on consumption, saving, and investment are micro effects.

- True, as these effects are observed at the individual or firm level, hence classified as microeconomic.

- Statement (II): Income tax is an example of direct tax.

- True, as income tax is levied directly on individuals and corporations.

- Explanation:

- Statement (II) provides factual information about the nature of income tax but does not specifically explain the microeconomic effects listed in Statement (1).

The correct option is Option 2: Both Statement (1) and Statement (II) are individually true but Statement (II) is not the correct explanation of Statement (1).