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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.

To determine

A well-funded social safety net can increase economic equality but will reduce economic output.

Explanation

Social safety programs are provided towards eliminating poverty. These services may include subsidies for household bills, job placement, and other cash equivalents for food. However, pushing aggressively for the economic equality may lead to the risk of declining economic incentives. A modest push for the economic equality can increase the economic output. This can be done by executing improved education and building a base of political support. A strong implementation might require high wage earners to pay for increased taxes which in turn will help the government in funding the social programs for poor...

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