Government alters the distribution of income by market intervention, in which case it modifies the prices established by market forces.

Question

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Government intervention can take the form of taxes, subsidies, price controls, and regulations that impact the prices and incomes of individuals and businesses in the market. These interventions can alter the distribution of income and wealth by reducing or increasing the amount of money people receive from work, investments, or government transfers.

Government Alters the Distribution of Income by Market Intervention, in Which