The federal government is concerned about how much lower income households spend

Question

The federal government is concerned about how much lower income households spend on transportation, specifically fuel given the high and increasing fuel prices. It finds that the average household with income less than $30,000 a year spends an average of $100 a month on fuel. Given this expense, it is trying to decide whether to provide these households a monthly Fuel Stamp of $50 that can only be used to purchase gasoline or simply provide households them with additional $50 of cash through existing Cash Transfer programs. Which program would be most likely to increase the purchases of gasoline for these households, given they are spending already $100 a month from their own resources, the Fuel Stamp or the Cash Transfer?

Explanation / Answer

Economic incentives motivate people to take a positive economic decision . Government wishes to increase Fuel Consumption among lower income households because it is low among lower income households. Low Fuel consumption maybe due to lack disposable funds and any freebie provided by the Government would trigger the same households to use it for increasing their fuel consumption, which earlier they were constrained to do.

So, Yes Option C will be the right answer. Pls rate if found helpful.

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