Which of the following will have a more destabilizing effect on the economy?
- a tax on the price of vehicle
-
a tax on petrol
- a decrease in the supply of vehicle
- moderate increase in wages
The correct answer is: B
Explanation
Petrol products are used for a number of things including, powering generator plants used by businesses and firms, fueling of vehicles for commercial and personal use, etc.
An increase in the price of petrol will lead to an increase in the general prices of goods and services, thereby, causing a distortion in economic growth.