ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
A government introduces a new tax on sugary drinks in order to reduce consumption and improve public health. Which type of government policy instrument is this?
The sugary drinks tax is a fiscal policy measure. Governments use taxation and spending to raise revenue and to influence behaviour, in this case reducing consumption for health reasons. It is not monetary policy, which works through interest rates and money supply, nor privatisation.
- AA fiscal policy measure used to influence behaviourCorrect
- BA monetary policy measure to control the money supply
- CA privatisation measure to transfer ownership to the private sector
Explanation
Taxation is a fiscal tool. Here it is used to change consumer behaviour as well as raise revenue. Monetary policy concerns interest rates and money supply, and privatisation concerns ownership of state assets, so neither applies.
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