Question

What is one reason why the government would provide financial assistance to an entrepreneur?

A.to decrease the high rate of failure of new businesses
B.to encourage the invention and development of products
C.to stimulate the economy while decreasing unemployment
D.to limit the amount of personal funds used to start the business

Answer 1

to stimulate the economy while decreasing unemployment

Answer 2

The correct answer is C.

A goverment, through its fiscal policy, is able to boost or limit economic growth by modifying the tax level and the amount of public spending.

In this case, providing financial assistance means decreasing taxes charged to entrepreneurs. Such expansionary fiscal policy aims to foster investment and therefore, its ultimate goal would be to increase aggregate demand and to produce economic growth.