Expansion in the size of government relative to the market sector will eventually retard economic growth because
A) larger governments will be more involved in activities for which they are ill-suited.
B) the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation.
C) the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector.
D) all of the above are correct.

Question

Quizplus · Accepted Answer

All of the options provided contribute to the idea that an expanding government can hinder economic growth. Larger governments may engage in inefficient activities (A), higher taxes can create economic inefficiencies (B), and government entities may lack the innovation and adaptability found in the market sector (C).

Expansion in the Size of Government Relative to the Market