Benefit rises - Cause spending in the local economies that have most deprivation> Recession . , Positive externality - positive externalities (benefits for people who are not directly participating in the market). E.G. by keeping families and workers healthy and by limiting the spread of infectious diseases, Demand inflation - Government spends less money (boom) means less demand in the economy. , Redistribution of income effect on motivation - wealthier people less motivated as would spend more on tax. , Reduce Taxes - People have higher disposable income> Recession. , Government increase spending o health/Education/Defence - because health spending is a major part of government spending - direct positive impact on aggregate demand and so increases output, economic growth and employment, Benefit of redistribution of income on poor - poorer people will have higher incomes and able to purchase more. Positive externality> better health/education for family. , Sin Taxes - High cigarette/alcohol taxes puts consumers off purchases  , Inefficient use of scarce resources   - difficulty in allocating scarce resources, since no price signals from interaction of Demand and Supply, Opportunity costs - money spent on redistribution could have been used on a better alternative, High direct taxes - Put workers off increasing work/companies move out, Reduce competition with private sector - less competition in public health provision than if health services were supplied through markcould lead to inefficient allocation of resources and to a lack of innovation, Reduce inflation - increase taxes to reduce disposable income. , Recession _redistribution   - tax burden automatically falls (social benefits rise) as incomes and employment fall,

Fiscal Policy Evaluation OCR GCSE

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