What prediction about growth would most economists make if a government enacts a tax on all transactions in financial markets?
A)The tax would increase growth because it would encourage people to leave the unproductive financial sector and move to a useful sector of the economy.
B)The tax would probably have no effect on growth because it would not affect capital or technology.
C)The tax would reduce growth because it would make it harder for those with productive opportunities to obtain funds from savers.
D)The effects would depend on whether it was borne primarily by the rich or by the poor.

Question

Quizplus · Accepted Answer

A tax on all transactions in financial markets would likely reduce growth by increasing the cost of capital and making it more difficult for investors to fund productive opportunities. This could lead to a decrease in investment and savings, hindering economic growth.

What Prediction About Growth Would Most Economists Make If a Government