Question

All societies face a trade-off between equality and efficiency.

Answer 1

Answer: decrease in efficiency / increase in equality

Explanation: Efficiency and Equality are two economic terms used to define the distribution of a countries wealth or resources. Efficiency describes how a country aims to manage its resources in other to attain maximum output while equality describes equal distribution of a nation's wealth. In the scenario above, if the country raises income taxes on the wealthiest Americans while increasing welfare payment to the poorest, this shows an idea of redistribution of wealth so that income from the wealthy is transferred to the poor by reducing the profit of the wealthy and raising the income of the poor. Now, these has an effect on the efficiency of the economy, with increased incentive and payment being offered to the poor and a decrease in the profit made by the wealthy due to increased taxes. The desire to put maximum effort to work reduces on the path of both, hence leading to a decrease in production of goods and services hence, decrease in efficiency