As pointed out by the 'big tradeoff', government action that redistributes incomes so that everyone has the same income leads to
A) efficient markets.
B) lower taxes on the rich than on the poor so that the rich do not lose their incentive to work.
C) resources being allocated according to a command system.
D) a smaller total output.
E) fairness according to the 'fair rules' approach.

Question

Quizplus · Accepted Answer

Government action that redistributes incomes so that everyone has the same income leads to a smaller total output. This is because the incentive to work hard and be productive is reduced, as there is no longer any reward for doing so. As a result, there is less innovation, less investment, and fewer goods and services produced overall. This is known as the 'big tradeoff', as society must choose between greater equality and greater efficiency.

As Pointed Out by the 'Big Tradeoff', Government Action That