A government provides subsidies to farmers to keep food prices low. This is an example of fiscal policy being used to
Question 1 Report
A government provides subsidies to farmers to keep food prices low. This is an example of fiscal policy being used to
Answer Details
The correct answer is achieve an equity objective.
Subsidies to farmers that keep food prices low are a form of government intervention aimed at making essential goods more affordable, particularly for lower-income households who spend a larger proportion of their income on food. This is an equity (fairness) objective because it ensures that basic necessities remain accessible to all members of society, reducing the burden on the poorest.
Subsidies increase government spending, so they do not reduce the budget deficit. They are an expenditure, not a source of revenue. They have no connection to interest rates, which are set through monetary policy.
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