ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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____ encourage business growth in deprived areas.
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____ encourage more sustainable business practices.
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____ support innovative start-up businesses.
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____ pay down government debt.
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Detailed explanation-1: -A subsidy is an incentive given by the government to individuals or businesses in the form of cash, grants, or tax breaks that improve the supply of certain goods and services. With subsidies, consumers are able to access cheaper products and commodities.
Detailed explanation-2: -Government subsidies are financial grants extended by the government to private institutions or other public entities, in order to stimulate economic activity or promote activities that are in the public good.
Detailed explanation-3: -A subsidy will shift the supply curve to the right and therefore lower the equilibrium price in a market. The aim of the subsidy is to encourage production of the good and it has the effect of shifting the supply curve to the right (shifting it vertically downwards by the amount of the subsidy).
Detailed explanation-4: -Raising taxes and cutting spending are two of the most popular solutions for reducing debt, but politicians may be hesitant to do both. Diverting spending from the military to other sectors may boost job growth, which could spur consumer spending and help the economy.