Question

Direct incentives are designed to induce changes in behavior. Indirect incentives change behavior in ways that were not intended. Identify each item as an example of a direct or an indirect incentive.a. Car alarms to discourage break-ins b. Raising corporate income tax rates leads to fewer new businesses c. Frequent-flier points to increase customer loyalty d. Government-funded debt relief for college graduates leads to more student-loan debt

Answer 1

Answer and Explanation:

The Direct incentive is the incentive that has an instant impact on the users of the resources and the returns to the investments are directly influenced

On the other hand, the indirect incentives have an indirect impact for changing overall conditions of the framework

Therefore the categorization is as follows

For direct incentive

1. car alarms

2. Frequent filter points

For indirect incentive

1. raising corporate income

2.Government-funded debt