Question

    The McDougall Rule, in the context of public finance,

    primarily suggests that:
    A Government spending should always be less than government revenue to avoid fiscal deficits. Correct Answer Incorrect Answer
    B Public goods should only be provided if their social benefits exceed their social costs, regardless of who pays. Correct Answer Incorrect Answer
    C The spatial distribution of public expenditure should aim to equalize marginal social benefits across different regions, considering differing needs and costs. Correct Answer Incorrect Answer
    D Taxation should be progressive, ensuring that higher-income individuals contribute a larger proportion of their income to government revenue. Correct Answer Incorrect Answer

    Solution

    The McDougall Rule, in public finance, primarily suggests that the spatial distribution of public expenditure should aim to equalize marginal social benefits across different regions, considering differing needs and costs. This rule advocates for an allocation of public funds that maximizes overall welfare by ensuring that the last unit of expenditure in each region yields the same social benefit.

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