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Explain and evaluate: “Industry complains of the higher taxes it must pay to finance subsidies to agriculture. Yet the trend of agricultural prices has been downward, while industrial prices have been moving upward, suggesting that on balance agriculture is actually subsidizing industry.”
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VerifiedThe parity ratio of farmers (prices received by farmers divided by the prices paid by farmer) is declining through the years, so basically the farmers have been subsidizing society. The subsidies to agriculture have also increased the supply of farm products and decreased prices, thus the subsidies are highly related to the lower prices.
This argument can be supported by the concept of price parity. According to McConnell, Brue, and Flynn (), the parity concept suggests that the relationship between the price received by the farmers for their agricultural products and the price they paid for the necessary goods and services should remain the same over time.
In this task, we need to analyze and explain the statement about subsidies of industries to agriculture.
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