Which of the following statements is incorrect regarding the nature of subsidies?
A. Implicit subsidies include utilization of such techniques as exchange rate manipulation, price controls, and quantitative restrictions on trade, as well as other methods of manipulating the terms of trade either for or against farmers.
B. Explicit agricultural subsidies include such programmes as government purchases of agricultural surpluses and government payments to farmers to keep land idle.
C. In case of explicit subsidy, there are governmental budgetary outlays while in case of implicit subsidy, supply prices are suppressed.
D. In case of implicit subsidy, there are governmental budgetary outlays while in case of explicit subsidy, supply prices are suppressed.
Answer:D
Which of the following statements is incorrect regarding the nature of subsidies?
A. Implicit subsidies include utilization of such techniques as exchange rate manipulation, price controls, and quantitative restrictions on trade, as well as other methods of manipulating the terms of trade either for or against farmers. B. Explicit agricultural subsidies include such programmes as government purchases of agricultural surpluses and government payments to farmers to keep land idle. C. In case of explicit subsidy, there are governmental budgetary outlays while in case of implicit subsidy, supply prices are suppressed. D. In case of implicit subsidy, there are governmental budgetary outlays while in case of explicit subsidy, supply prices are suppressed.
Explanation: Generally, the Subsidies are government policies in aid of one or more industries, usually carrying a financial benefit to the industry. At the most conventional level, subsidies are government financial transfers to an industry, through payments to workers or to firms. Probably nobody would deny that the government is subsidizing the industry if it is paying part of the wages of workers in the industry or it is granting firms in the industry funds to make capital purchases. This is the narrowest definition of a subsidy.