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    Question

    Which fiscal imbalance refers to the mismatch between

    revenue-raising powers and expenditure responsibilities across different levels of government, a key concern for the Finance Commission?  
    A Horizontal fiscal imbalance Correct Answer Incorrect Answer
    B Cyclical fiscal imbalance Correct Answer Incorrect Answer
    C Structural fiscal imbalance Correct Answer Incorrect Answer
    D Vertical fiscal imbalance Correct Answer Incorrect Answer
    E Primary fiscal imbalance Correct Answer Incorrect Answer

    Solution

    Vertical fiscal imbalance refers to the mismatch between the revenue powers of the Union and the expenditure responsibilities of States. Addressing this imbalance through tax devolution and grants is a central function of the Finance Commission, including the 16th Finance Commission.  

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