A government replaces part of an annual cash benefit for adults on low incomes with free skills courses. Total government spending on the scheme is unchanged. Which of the following is correct?
The courses are transfer payments, as participants pay no cash price for them.
The change stops redistributing to these adults, as they receive a service instead of money.
The change can make redistribution longer-lasting, as better skills raise recipients' own future earnings.
The change is contractionary fiscal policy, as less cash is paid to households.
76 exam-style questions on OCR GCSE Economics 3.5 Fiscal policy, covering 3.5.1 Government spending and revenue, 3.5.2 Budget balance, surplus and deficit, 3.5.3 What is fiscal policy, 3.5.4 Calculate effects of taxes and spending, 3.5.5 Analyse effects of taxes and spending, 3.5.6 Costs and benefits of fiscal policy, and 3.5.7 Redistributing income and wealth. Each one has a worked solution and a mark scheme showing where the marks go.