Which of the Following Represents a Way That a Government

question 202

Multiple Choice

Which of the following represents a way that a government can help the private market to internalize an externality?

• A)taxing goods that have negative externalities
• B)subsidizing goods that have positive externalities
• C)The government cannot improve upon the outcomes of private markets.
• D)Both a and b are correct.

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Definitions:

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Monetary Policy

The process by which a central bank, currency board, or other regulatory authority manages the supply of money in an economy, primarily through interest rates to achieve macroeconomic objectives like inflation, consumption, growth, and liquidity.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Taxing

The act of imposing taxes on individuals or businesses by the government to generate revenue for public expenditures.