ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
Which of the following is the best example of a supply-side fiscal measure aimed at long-term growth rather than short-term demand?
Tax allowances for companies that invest in staff training are a supply-side fiscal measure, because they improve skills and productive capacity over the long term. A temporary sales tax cut or higher pensions mainly boost demand, and a base rate rise is monetary policy.
- ATax allowances for companies investing in staff trainingCorrect
- BA temporary cut in the sales tax rate for one quarter
- CAn increase in the state pension payment
- DA rise in the base interest rate
Explanation
Supply-side fiscal measures use tax or spending to raise productive capacity and incentives, such as tax relief on training or investment. A temporary sales tax cut and higher pensions mainly affect demand, and the base rate is a monetary tool.
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