Macro Chapter 6 study guide questions

According to the Bureau of Economic Analysis, government income transfer payments amounted to approximately what percent of national income?

16 percent

Which of the following is true about the market and public sectors?

Competitive behavior is present in both sectors.

Despite many differences, the market and public sectors are similar in which one of the following respects?

It will be costly to use scarce goods, whether through the private or the public sector.

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

Most of the benefits of pork-barrel projects within your district will accrue to your constituents, whereas most of the costs will be imposed on voters from other districts.

Assume that you are a member of the U.S. House of Representatives from your home state and district. Which of the following best explains why you have a strong incentive to get the federal government to finance pork-barrel projects in your district?

Most of the benefits of pork-barrel projects within your district will accrue to your constituents, while most of the costs will be imposed on voters from other districts.

Which of the following statements is False?

Political activities consistent with economic efficiency tend to emerge naturally from the unconstrained democratic political process.

Economists use the term shortsightedness effect to describe which one of the following phenomena?

Politicians tend to support actions that have immediate and easily recognized current benefits.

In the case of a private good, which of the following forms of economic organization will result in the strongest incentive for consumers and producers to economize?

The good is produced privately and consumers purchase it with their own money.

Which of the following is true of government activities under a system of representative democracy?

When voters pay in proportion to benefits received, all voters will gain if the government activity is productive.

When voters pay in proportion to the benefits received from an economic action of the government, if the government activity is productive,

all voters will gain.

Which of the following is a predictable side effect of increased government activity (e.g., taxes and subsidies) designed to redistribute income among citizens?

an increase in rent-seeking activity

Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?

an increase in rent-seeking activity

Public choice analysis

assumes individuals in the public sector act in their own self-interests.

When the government both provides a service and covers its costs through taxation,

consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided.

"The ideal policy, from the viewpoint of the state, is one with identifiable beneficiaries, each of whom is helped appreciably, at the cost of many unidentifiable persons, none of whom is hurt very much." (George Stigler, A Dialogue on the Proper Economic Role of the State) Refer to Scenario 6-1. This statement is probably

correct because voters who have a strong personal interest in an issue will tend to support candidates who cater to their views, whereas most other voters ignore the issue.

Government decisions tend to be biased toward actions that have

current benefits that are easily observable and future costs that are difficult to identify.

Theory of public choice a. analyzes the likelihood that various public sector alternatives will be instituted. b. assumes that economic incentives influence the choices of voters. c. applies the tools of economics to the collective decision-making process. d. is all of the above.

d. is all of the above.

Public choice theory suggests that politicians will be most likely to favor redistribution of income from

disorganized individuals to well-organized special interest groups.

Senator Spendall is able to use his position on an important committee to set aside government funding specifically for a new bridge in his hometown. This is an example of

earmarking.

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

expand their budgets to sizes beyond what would be considered economically efficient.

Which of the following factors weakens the case for private-sector provision of goods and services as opposed to public-sector provision?

externalities

Which of the following is an example of a good that is produced by the public sector but consumers purchase it in proportion to the benefit received?

first-class mail delivery from the U.S. Post Office

Which of the following is legally permitted to use coercive force to modify the actions of adults against their will?

governments

Giving local governments more power is less dangerous than giving the same power to the national government because

higher exit options exist at the local level--it is easier for people to move away from a bad local government.

Economic theory leads us to expect that the typical voter will be uninformed on many issues because

information is costly, and the individual voter casting a well-informed vote can expect negligible personal benefit.

At the most basic level, the distinguishing characteristic of government that makes it different from private firms is

its ability to use coercive force against people to modify their behavior or force them to pay for a good or service whether they benefit from it or not.

Which of the following refers to when legislators trade votes on legislation?

logrolling

Legislators often gain by bundling a number of projects benefiting local districts at the expense of general taxpayers. Such legislation is called

pork-barrel legislation.

When analyzing public sector decision making, economic theory assumes that voters, politicians, and government officials will

respond to changes in personal benefits and costs when making public sector choices.

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

shortsightedness effect.

"The ideal policy, from the viewpoint of the state, is one with identifiable beneficiaries, each of whom is helped appreciably, at the cost of many unidentifiable persons, none of whom is hurt very much." (George Stigler, A Dialogue on the Proper Economic Role of the State) Which of the following groups does the quotation in Scenario 6-1 suggest would have the most influence on public sector action?

special interest groups

Legislation that offers immediate and easily recognized benefits, at the expense of uncertain costs that are in the distant future (such as financing by government debt), is often enacted even when economic inefficiency results. This can be expected because of

the shortsightedness effect.

Market allocation and the political process differ in that

there is a one-to-one link between payment for and receipt of a good in the market sector, but this is often not true in the political sector.

Public choice analysis indicates that

unconstrained democratic governments often enact special-interest programs that waste resources and impair the standard of living.

In which case is the political process most likely to result in the acceptance of productive programs and rejection of unproductive political activities?

when both the benefits and costs are widespread among voters

When is representative democracy most likely to lead to the adoption of an inefficient government program?

when the program provides substantial benefits to a small proportion of voters and the costs are widespread among voters

Public choice theory indicates that competitive forces between candidates in elections provide a politician with a strong incentive to offer voters a bundle of political goods that she believes

will increase her chances of winning elections.