The question being asked is "To what extent should the Canadian Government use it's fiscal and monetary policies to narrow the rich poor gap?" First of all Fiscal policy refers to the government role in collecting taxes and spending money. When using the fiscal policy the government has the ability to increase or decrease the taxes of the citizens. The monetary policy is dealing with the amount of money that is in circulation, which means that the Government can control the amount of money available to the economy.
The first scenario that the government could raise taxes, which means that there is a decrease in disposable income and consumer spending. Then while they do that they could lower bank rates so that the people can borrow money easier. This would work because the rich could pay their taxes, but since they are rich they do not need to borrow money, and the poor can pay taxes but it would be easier to borrow money from the banks because the interest rates are not as high.
Another scenario is that the Government could lower taxes so there is an increase of disposable income and consumer spending. If they did that then the government could raise the bank rate so it costs more to borrow money form the banks and getting loan
A third scenario is that the government could lower taxes so there is and increase of disposable income and consumer spending, and they could lower bank rates so it would be cheaper for people to borrow money. This could work because people are not spending as much on taxes, and if they need a loan it is easier to get the loan.
The reason why the first scenario wouldn't work well is because if the taxes are raised a whole bunch people will be needing more of a loan. Since most of their money is going to taxes they won't have the money to pay back the loans so these people will be going more and more into debt. Even the rich would be going into debt because they would be paying so much in taxes they would eventually need to start taking out loans and it wouldn't be as easy to pay the loans off due to the interest rates. This may narrow the gap but definitely not in a good way. The third scenario wouldn't work because our economy would just keep inflating and inflating until the economy crashed and we would end up going through another depression and everyone would be poor. The gap would also be narrowed here too but also not in a good way.
So by raising the taxes and lowering the bank rates the government could control the gap and narrow it a bit. It would be better for socie
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