Question

When the government redistributes income to achieve greater equality, it

a. distorts incentives
b. improves efficiency
c. focuses on middle income brackets.
d. relies on foreign aid to help balance the budget?

Answer 1

The correct answer is a. distorts incentives.
When the government redistributes income to achieve greater equality, it reduces reward for working hard. As a result, people will work less and produce fewer goods/services. Although it may achieve equality, it will result in inefficiency.