If the distribution of wealth is inequitable, the economic gulf between the rich and poor widens persistently. Effective and aggregate demand in the country falls due to which savings are not converted into investments and consequently, economic backwardness is created. Fiscal policy could curtail this economic disparity. In this situation the government, levying the high taxes on the rich and consuming on the welfare and aid to the poor, could curtail this difference between rich and poor to a grater extent.
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