Which fiscal policy would most likely result in the largest budget surplus?A.Low taxation and low spendingB.Low taxation and high spendingC.High taxation and low spendingD.High taxation and high spending
Question
Which fiscal policy would most likely result in the largest budget surplus?A.Low taxation and low spendingB.Low taxation and high spendingC.High taxation and low spendingD.High taxation and high spending
Solution
The fiscal policy that would most likely result in the largest budget surplus is C. High taxation and low spending.
Here's why:
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Fiscal policy refers to the use of government revenue collection (taxation) and expenditure (spending) to influence a country's economy.
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A budget surplus occurs when income (in this case, primarily from taxation) exceeds expenditure (spending).
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Therefore, to maximize the budget surplus, the government would need to maximize income and minimize expenditure.
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High taxation would maximize income, and low spending would minimize expenditure.
So, the combination of high taxation and low spending would most likely result in the largest budget surplus.
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