Question : What is the purpose of a government subsidy?
Option 1: To encourage economic growth in a particular sector
Option 2: To decrease government spending
Option 3: To increase taxes
Option 4: To pay down the national debt
Correct Answer: To encourage economic growth in a particular sector
Solution : The correct answer is (a). To encourage economic growth in a particular sector.
The purpose of a government subsidy is to provide financial support or assistance to individuals, businesses, or industries with the aim of promoting specific economic activities, fostering growth, or addressing market failures. Subsidies are typically provided by governments to encourage investment, research and development, employment, or production in targeted sectors.
Government subsidies can take various forms, such as direct cash grants, tax incentives, loan guarantees, or reduced interest rates. They are often used to support industries that are considered vital for economic development, such as renewable energy, agriculture, technology, healthcare, or education.
By offering subsidies, governments aim to create a favorable environment for businesses or individuals to participate in certain sectors, stimulate innovation, create jobs, enhance competitiveness, or achieve other economic or social objectives.
