Unlike Pollution Taxes, What Do Pollution Permits Allow Governments to Do

question 81

Multiple Choice

Unlike pollution taxes, what do pollution permits allow governments to do?

• A) Remove the source of the externality.
• B) Give preferential treatment to industries deemed essential.
• C) Place the burden of the cleanup on polluters.
• D) Set limits on the amount of pollution generated.

---

Definitions:

Fiscal Policy

Government policies regarding taxation and spending that are used to influence economic conditions, including stimulating or restraining economic growth.

Potential GDP

The highest level of Gross Domestic Product (GDP) an economy can sustain over a long period without increasing inflation, reflecting its full employment output.

Inflation

A widespread rise in prices and a decrease in the value of money.

Spending Multiplier

A concept in Keynesian economics that quantifies the effect of an increase in autonomous spending on the total economic output.