When the Government Enacts Policies to Redistribute Income

question 235

Multiple Choice

When the government enacts policies to redistribute income,

• A)the objective is to enhance efficiency and a side effect is that the allocation of resources becomes more equal.
• B)the objective is to enhance efficiency and a side effect is that the allocation of resources becomes less equal.
• C)the objective is to enhance equality and a side effect is that the allocation of resources becomes more efficient.
• D)the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient.

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Definitions:

Average Collection Period (ACP)

A financial ratio that measures how long it takes to collect on credit sales. Also called days sales outstanding (DSO).

Credit Policy

A set of guidelines that a company follows to determine credit terms for customers, which encompass payment period, amount of credit, and the discount terms.

Cash Discount

A reduced price offered by a seller for goods or services if the buyer pays in cash, or within a specified time period, encouraging early payment.

Receivables

Money that is owed to a company by its customers for goods or services provided on credit, represented as assets on the balance sheet.