Question

Why is it difficult to improve the well-being of a group through income transfers? a. High-income voters are reluctant to help those less fortunate than themselves. b. Transfer programs encourage recipients to become more productive and, as a result, their funding tends to decline with the passage of time. c. Unintended secondary effects and competition for transfers reduce the net gains of the intended beneficiaries. d. Modern politicians are reluctant to levy taxes for the finance of income transfer programs that benefit specific groups of citizens.

Answer 1

C) Unintended secondary effects and competition for transfers reduce the net gains of the intended beneficiaries.

Step-by-step explanation:

Income transfers sometimes, not always, carry negative secondary effects that can offset the benefits they generate. Some of the most noticeable negative secondary effects are:

• Income transfers can reduce the incentive of people who earn low incomes to try to earn higher incomes. If they earn higher incomes then they will not be eligible to receive low income transfers. The only way to get out of poverty is to earn more money.
• By reducing some of the negative effects caused by poverty, income transfers also reduce the opportunity cost or making bad economic decisions like dropping out of school, drug use, dropping from the workforce, unexpected or unwanted pregnancies by teenagers, etc.

It is very difficult, if not impossible, to determine exactly at what point do income transfers start to hurt those that receive them or if they are always necessary. It all depends on what happens with every specific person, sometimes they are very useful and other times they aren't.