ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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____ it can disincentivise people from working.
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____ people are less likely to save.
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____ businesses will invest more.
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____ that it is unconstitutional.
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Detailed explanation-1: -The objective of a fiscal policy to redistribute income and wealth is to increase the standard of living of the poorer and their holding of wealth, and to reduce that of the richer so as to achieve greater equality.
Detailed explanation-2: -Which discretionary fiscal policy would have a more pronounced impact on the economy? A 200 billion dollar increase in government spending would have a more pronounced impact on the economy.
Detailed explanation-3: -Redistribution can be a reason for the efficiency loss because it is a costly process for which the government can require more funds to conduct the process by raising the taxes in the economy or borrowing debt from other countries.
Detailed explanation-4: -Discretionary fiscal policy is subject to the same lags that we discussed for monetary policy. It takes some time for policy makers to realize that a recessionary or an inflationary gap exists-the recognition lag.