Who Actually Benefits from a Subsidy to Sellers

question 81

Multiple Choice

Who actually benefits from a subsidy to sellers?

• A) Only consumers benefit from any kind of subsidy.
• B) Only sellers benefit, since it is their subsidy.
• C) The benefit is shared depending on elasticity of the supply and demand curves.
• D) None of these statements is true.

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Definitions:

Aggregate Demand

The total demand for all goods and services in an economy at various price levels, over a specific time period.

Expansionary Gap

A situation where the actual output in an economy is higher than the potential output, often leading to inflation.

Potential GDP

The maximum output an economy can achieve when all resources are used efficiently and effectively, without causing inflation.

Cost-Push Inflation

Inflation that occurs when the prices of inputs such as labor and raw materials go up, causing a reduction in the supply of these products.