Which of the following will have a more destabilizing effect on the economy?
Answer Details
A tax on petrol will have a more destabilizing effect on the economy. When a tax is levied on petrol, it leads to an increase in the price of petrol, which affects the transportation sector and indirectly impacts other sectors of the economy that rely on transportation, such as the agriculture and manufacturing sectors. This, in turn, leads to an increase in the price of goods and services and inflation. Additionally, an increase in the price of petrol reduces the purchasing power of consumers, who may need to allocate a larger share of their income to fuel expenses, resulting in lower consumption and decreased economic activity. Therefore, a tax on petrol has a more destabilizing effect on the economy compared to the other options.