6
QuizMultiple Choice

Fiscal Policy: Taxes

Question 6 • * HSA 26-27 Economics

If expansionary taxation policies encourage growth, are they always appropriate to implement?

Answer
N
No, government services could encourage growth but other practices could be more effective based on the economic situation.
Y
Yes, the private sector can easily and affordably replace all services and facilities cut by the government.
N
No, the government is capable of providing many but not all services individuals and businesses need.
Y
Yes, the government will still ensure that individuals and businesses continue to receive all necessary services.

Explanation

No. Whether an expansionary tax policy is appropriate depends on the economic situation and whether it is likely to encourage growth more effectively than other available policies. Government services can support growth, but that does not mean tax cuts or other expansionary tax measures are always the best choice. Choice A states this distinction; the other choices make overly broad claims about private replacement or guaranteed services.

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