In which three ways are taxes commonly used to influence the economy?

• A. To subsidize all industries, fix wages, and promote monopolies
• B. To raise government revenue, redistribute income, and discourage certain behaviors
• C. To increase private investment, lower government spending, and reduce exports
• D. To eliminate all market failures, set prices for goods, and control inflation directly

Answer: (B)

Verified step by step guidance

1. Understand that taxes are a tool used by governments to influence economic activity in various ways.
2. Identify the primary purposes of taxation: raising government revenue, redistributing income, and discouraging certain behaviors.
3. Recognize that raising government revenue means collecting funds to finance public goods and services.
4. Know that redistributing income involves using tax policies to reduce economic inequality by taxing higher incomes more and supporting lower-income groups.
5. Understand that discouraging certain behaviors refers to imposing taxes on goods or activities considered harmful, such as tobacco or pollution, to reduce their consumption.