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Homework answers / question archive / When the government attempts to improve equality in an economy the result is often: a) An increase in overall output in the economy, b) Additional government revenue since overall income will increase, c) A reduction in equality, d) A reduction in efficiency
When the government attempts to improve equality in an economy the result is often:
a) An increase in overall output in the economy,
b) Additional government revenue since overall income will increase,
c) A reduction in equality,
d) A reduction in efficiency.
Answer: D
Whenever the government tries to increase equality, efficiency almost always decreases. This is a classic trade-off in economics since the government could theoretically force equality of incomes but then the incentives to innovate disappear and the economy would stagnate. The economy shrinks as equality because to achieve equality you need to punish those who are adding value and thus they will decide to add less value.
