Question

In: Economics

Some economists have proposed to increase the federal tax on gas from 18.4 cents per gallon...

Some economists have proposed to increase the federal tax on gas from 18.4 cents per gallon to 36.8 cents per gallon in order to help reduce the government budget deficit (and thus control the growing national debt.)

What do you think about this specific proposal?

a. Are you in favor?

b. Explain your point of view about this proposed policy.

Solutions

Expert Solution

Answer:Before Covid 19 crisis answer to this question or such suggestion of ecomists might be somewhats different but taking account of this Pandemic Problem ,When all the countries in the world has been hit hard.

Such conditions are peojected by IMF and world bank like institutions that World GDP growth will decrease alot as most of economic activities has been strucked due to Lockdown.As economic activities like factories, transportation etc remain very less or absent hence as a result DEMAND for oil and gas also declined in comparision to its supply as a result prices droped alot.

So under such conditions if government will try to raise the federal Tax on gasoline then will lead to further decline in economic activites and Consumers will get to hid hard 1st by this pandemic and then by such government policy.

Thos will lead to fury decline in demand as well as economic activities in the economy rather than increasing it.

Hence government intervention in market economy should be this time to incentivise the growth rather to hinder it.

Hope it helps!

Rahul Sunny answered 2 years ago
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