Chapter 27: Problem 12

Which of the following government policies is an incomes policy? a. A reduction in welfare expenditures b. The publication of a list of guidelines suggesting maximum wage and price increases c. An increase in the money supply d. All of the above

Short Answer

Expert verified

The correct answer is option (b) - The publication of a list of guidelines suggesting maximum wage and price increases. This is considered an incomes policy because it directly manages wages and prices with the aim of controlling inflation and balancing economic growth with limiting inequalities.

Step by step solution

Analyze option (a)

A reduction in welfare expenditures is a policy that involves a decrease in government spending on social welfare programs. This would not directly manage wages or prices, and therefore is not an incomes policy.

Analyze option (b)

The publication of a list of guidelines suggesting maximum wage and price increases is an example of a policy that directly seeks to control wages and prices. This policy is in line with the definition of an incomes policy as it aims to manage inflation and balance economic growth with limiting inequalities.

Analyze option (c)

An increase in the money supply is a policy that involves injecting more money into the economy, which can influence inflation and interest rates. While it may indirectly affect wages and prices, it is primarily considered a monetary policy, not an incomes policy.

Analyze option (d)

Option (d) claims that all of the above policies are examples of incomes policies. However, as we have already determined, options (a) and (c) are not examples of incomes policies.

Conclusion

Considering the analysis of each option, only option (b) - The publication of a list of guidelines suggesting maximum wage and price increases - is an example of an incomes policy.