Government transfers reduce the size of the economic pie

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How might increasing the level of government transfers reduce the size of the economic pie? Check all that apply. (Can you give an explanation if you answer this? I want to be able to actually understand it, not just put in the right answer)

Greater transfer activity diverts productive resources into rent-seeking activity.

Higher taxes may be necessary to finance increased transfer payments, leading to a reduction in hours worked because of a decrease in the reward for productive activity.

People may devote less time and energy to avoidance of taxes needed to finance increased transfer payments.

Reference no: EM131004888

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