Redistribution via progressive taxation and transfers

Steps:

• Higher income tax rates collect more revenue from wealthier individuals.
• Revenue funds extra transfer payments, like cash benefits to the poor.
• Money shifts from high-income to low-income groups.
• This alters the overall income distribution in society.

Why A is correct:

• Transfer payments and progressive taxation directly redistribute income, as defined in fiscal policy, by reducing income inequality without changing total income.

Why the others are wrong:

• B: It promotes more equal distribution but does not guarantee complete equality of incomes.
• C: No direct causal link exists between taxation/transfers and increased unemployment.
• D: The policy targets income support, not job creation, so it does not reduce unemployment.

Final answer: A