_______ posits that as real per capita GNP increases, society demands more public goods and fewer private goods?
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Answer: C. Wagner’s law
Explanation
Wagner's law posits that public sector economic activity expands as real per capita income grows. Societies demand increased government services and public goods as their overall wealth increases over time. Economic development consistently correlates with a larger relative share of public sector expenditures. Adolph Wagner was a nineteenth-century German economist who studied public finance and government growth. Economic modernization requires infrastructure, regulation, and social services typically provided by governments. Public goods include education, defense, and healthcare systems funded through national taxation revenues.
Fiscal policy analysts study Wagner's law to understand long-term trends in government budget allocations. Developing nations experience shifts toward public spending as citizens demand better social infrastructure. Macroeconomic theories help governments plan sustainable public budgets alongside growing private economies. Incomes policy refers to government wage and price controls rather than long-term public sector growth. Moral hazard describes risk-taking behavior when insulated from negative consequences by insurance or policy. Fiscal policy encompasses short-term government taxation and spending maneuvers to stabilize business cycles.
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