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When the government redistributes income from the wealthy to the poor efficiency?

In a Robin Hood effect, income is redistributed so that economic inequality is reduced. For example, a government that collects higher taxes from the rich and lower or no taxes from the poor, and then uses that tax revenue to provide services for the poor, creates a Robin Hood effect.

How does government redistribute income?

Redistribution of income and wealth is the transfer of income and wealth (including physical property) from some individuals to others by means of a social mechanism such as taxation, charity, welfare, public services, land reform, monetary policies, confiscation, divorce or tort law.

When the government redistributes income with taxes and welfare?

When the government redistributes income with taxes and welfare, the economy becomes more efficient. When economists say, “There ain’t no such thing as a free lunch,” they mean that all economic decisions involve trade-offs. You just studied 35 terms!

What happens when the government attempts to cut the economic pie into more equal slices?

as a result of a successful attempt by government to cut the economic pie into more equal slices, government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone.

What happens when the government prevents prices from adjusting naturally to supply and demand?

When the government prevents prices from adjusting naturally to supply and demand, it impedes the invisible hand’s ability to coordinate the millions of households and firms that make up the economy, adversely affecting the allocation of scarce resources.

What is the most fundamental issue that economics addresses?

The fundamental economic problem is the issue of scarcity but unlimited wants. Scarcity implies there is only a limited quantity of resources, e.g. finite fossil fuels. Because of scarcity, there is a constant opportunity cost – if you use resources to consume one good, you cannot consume another.

Which of the following is a monetary policy that can be used to counteract a recession?

Which of the following is a monetary policy action used to combat a recession? decreasing the discount rate.

What creates the fundamental economic problem of scarcity?

Scarcity, or limited resources, is one of the most basic economic problems we face. We run into scarcity because while resources are limited, we are a society with unlimited wants. Therefore, we have to choose. We have to do those things because resources are limited and cannot meet our own unlimited demands.

Which of the following will increase the money supply of a country?

Fall in repo rate, Purchase of securities in open market and Decrease in cash reserve ratio will increase the money supply.

What is role of money multiplier in determination of money supply?

The money multiplier describes how an initial deposit leads to a greater final increase in the total money supply. It identifies the ratio of decrease and/or increase in the money supply in relation to the commensurate decrease and/or increase in deposits.

What is the multiplier effect example?

An effect in economics in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent. For example, if a corporation builds a factory, it will employ construction workers and their suppliers as well as those who work in the factory.

What are the factors that influence supply and demand?

The following factors determine market demand for a commodity.

  • Tastes and Preferences of the Consumers: ADVERTISEMENTS:
  • Income of the People:
  • Changes in Prices of the Related Goods:
  • Advertisement Expenditure:
  • The Number of Consumers in the Market:
  • Consumers’ Expectations with Regard to Future Prices:

What are 3 factors that change both supply and demand?

Factors That Affect Supply & Demand

  • Price Fluctuations. Price fluctuations are a strong factor affecting supply and demand.
  • Income and Credit. Changes in income level and credit availability can affect supply and demand in a major way.
  • Availability of Alternatives or Competition.
  • Trends.
  • Commercial Advertising.
  • Seasons.