Question

If the United States government raises the income taxes on the wealthiest Americans, while increasing welfare payments to the poorest Americans, the result will likely be__________ (increase/decrease) in efficiency and___________ (increase/decrease) in equality in the United States.

Answer 1

Answer:

(Decrease, Increase)

Explanation:

When the government formulates and implements policies aimed at increasing equality, the society will experience a reduction in the level of efficiency. For example, an increase in income tax on wealthiest Americans, and redistribution of the tax revenue to the poorest Americans would may discourage the wealthy from taking more income-generating activities which create jobs, this is not optimal. At the same time, this policy would reduces the peoples’ incentive to work hard to earn their own money.