An equalization grant to a provincial government is mainly intended to:
Correct answer: A. Reduce differences in fiscal capacity among regions
- A. Reduce differences in fiscal capacity among regions
- B. Give the central government ownership of provincial land
- C. Restrict all provincial spending on social services
- D. Replace the tax collection authority of local governments
Explanation
Equalization grants help regions with weaker revenue capacity provide reasonably comparable public services. They address horizontal fiscal differences rather than replacing the constitutional structure of government.
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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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