This year is an election year for Dmitriosinu Island\'s great leader, which is t

Question

This year is an election year for Dmitriosinu Island's great leader, which is the highest paid job on the island. There are two contenders for the position: the one-term incumbent, Ms. Vig Guve, and the challenger, Mr. Fleur Matte. Three months before the election, Ms. Guye announces changes in administration policies. These changes include reimbursement of taxes for people below a certain income level, the support of a controversial social policy, and a tightening monetary policy. Not to be outdone, Mr. Matte promises similar changes in economic policy, but remains staunchly opposed to the social policy. Based on what you know of political business cycles, what is Ms. Guye's most likely motivation for announcing the modified administration policies? Ms. Guye wants to decrease her personal tax rate. Ms. Guye knows that making these difficult changes is necessary for the future of o Dmitriosinu Island; thus, she is willing to implement them even though it means she might not win the election. Mr. Matte is willing to throw the election if these policy changes are put in place. Ms. Guye supports the social change that will come from lower taxes and the new controversial social policy. Ms. Guye wants to be the first mover on social policy to pigeonhole Mr. Matte. Ms. Guye knows that if personal disposable income increases and inflation decreases, she is more likely to be reelected.

Explanation / Answer

B is correct

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