According to Wagner's law, economic development generally tends to cause:
Correct answer: A. A rise in public expenditure relative to national income
- A. A rise in public expenditure relative to national income
- B. A permanent abolition of taxation
- C. A fall in public services as income rises
- D. A fixed public budget regardless of national income
Explanation
Wagner's law proposes that public expenditure tends to grow more than proportionately as an economy develops. Rising income increases demand for education, health, infrastructure and other public services.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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