skip to Main Content

Stop worrying about assignment deadlines, let us help with this paper!

Smart students don’t copy paste information from all over the web hoping to get a good grade! Watch the video below to learn what they do:

Use the circular flow diagram to show how each of the following government actions simultaneously affects the allocation of resources and the distribution of income:a. The construction of a new high school.b. A 2-percentage-point reduction of the corporate income tax.c. An expansion of preschool programs for disadvantaged children.d. The levying of an excise tax on polluters.
a. The construction of a new high school. In building the school, the effect would be an increase in government expenditures to the product market (5) and an increase in business revenues (3). The owners of the resources used to building the school will have an increased income (1). Resources will be diverted from the private sector (flows 3 and 4 will shrink, 5 and 6 will increase). To pay for the high school, taxes may have to be increased (11 and 12). If the economy is experiencing unemployment, the increase in government spending (5) may increase total output and employment. The effect on the distribution of income (the flows within 1 and 12) will depend on the progressivity of the tax system versus the distribution of the compensation to the resources building the school. b. A 2-percent reduction of the corporate income tax. Business taxes will be reduced (11). Business owners will receive a larger percent of the money income (1). If businesses use the increased profits to buy capital goods, labor and the owners of the other resources could benefit. If the reduction in the corporate income taxes results in a decrease in government spending (5) and an increase in corporate spending (1), there would be a reallocation of resources. If the economy is experiencing unemployment and government spending does not decrease, there could be an increase in spending if businesses increase their spending on capital goods (1). The effect on distribution will depend largely on whether…

e profits go directly to upper income owners or are reinvested into the capital and labor of the company. c. An expansion of preschool programs for disadvantaged children. This is shown as an increase in goods and services from government to households (9) or as a decrease in net taxes, which is equivalent to an increase in transfer payments (12). In either case, this is a redistribution of income or services in favor of the less well off. As additional teachers are hired and paid, there will be an increase in resources paid by the government (7). There will be some reallocation of resources from private enterprise to government and some decrease in unemployment, unless the economy is already at full employment. In this case, there will some upward pressure on prices since, to the extent the program is a transfer payment, there will be no increase in production. d. The levying of an excise tax on polluters. This will be an increase in net taxes paid by business (11). Since business will regard this as an increase in costs, it will decrease its demand for factors of production (2), leading to a decreased flow of income to the factor markets (1). With less money income, households will decrease their consumption demand for goods and services from businesses (4) and business receipts (3) will be less. Also, the decrease in household income will lead to a decrease in net household taxes paid to government (12). The distribution of income will be slightly away from profits and therefore toward the other three categories. To the extent that total tax revenues increase (11) – (12), there will be a slight increase in allocation of resources to government away from private enterprise. There will also likely be a reallocation of resources toward pollution control equipment. The increased costs to business, having caused a decrease in supply, will tend to increase unemployment and prices.



Once you place a custom order, our experts will start working on your paper in as little as 5 minutes. What’s more, we’ve never missed a single deadline! You never have to waste your precious time copying and pasting information from all over the web in order to write a paper ever again!


As a student, you can’t afford to spend a whole lot of money to get your paper written by a pro. With us, you don’t have to! We offer custom papers from as little as $13.99 per page! Additionally, if you have an exceptionally large order, we offer 20% discount.


Researching, sourcing, and writing each of our academic papers is done by a team of professional tutors according to your exact specifications. This long process provides you with absolute assurance that the work which you purchase from us has not been plagiarized.


We take your privacy very seriously. In this spirit, we retain absolutely no personal information regarding you once your project has been completed. Moreover, no customer payment information is available on our end since we use Paypal as our third-party payment processor.