ECON Test 3

the framers of the constitution sought to limit the economic role of the government as evidenced by (3 examples)

1. the enumeration of the permissible powers of the federal government in Article I, Section 8. 2. the 5th Amendment's limitation on the government's power to take private property. 3. the 10th Amendment's allocation of all non-enumerated powers to the states and the people.

When there are no constitutional constraints on democracy, politicians will

: find it advantageous to provide income transfers and other favors to interest groups in exchange for votes and political contributions, and this will eventually lead to budget deficits, high taxes, and economic stagnation.

Which of the following is not a basic freedom guaranteed by the U.S. Constitution?

Freedom of Trade

Which of the following will reduce the likelihood a person will experience periods of poverty?

Getting married before having a child.

Which of the following occurs when a democratic government becomes more heavily involved in taxing some in order to provide income transfers and subsidies to others?

Resources are channeled away from productive projects toward lobbying and other favor-seeking activities.

Which of the following best explains why legislators often find debt financing more attractive than taxation

The current cost of debt financing is less visible than taxation.

A state has sold its toll roads to a private company. What will be the most likely outcome of this action?

The toll road system will be run more efficiently and service will improve.

In the government sector, there is

a. nothing comparable to profit and loss that will weed out inefficient activities. b. nothing comparable to bankruptcy that will bring inefficient programs to a halt. c. a strong incentive for managers of government agencies and enterprises to expand the size of their government funding.

The dominant Keynesian view of the 1960s and 1970s stressed that

changes in government spending and budget deficits can help stabilize an Economy

When services are provided and financed by local rather than higher levels of government and people can move freely among governmental units,

competition among governmental units will help residents get more for their tax dollars.

A recent study by Isabel Sawhill and Ron Haskins of the Brookings Institution found that a person could reduce their chances of living in poverty from 12 percent to 2 percent by

completing high school (at a minimum), working full time, and getting married before having a child

Competition is:

important in both the market and government sectors.

The political structure that is most consistent with economic growth and progress is

limited government, protection of individuals from aggression by others, and decentralized political decision-making.

Since the wide spread acceptance of the Keynesian view during the 1960s,

perpetual budget deficits have been the norm.

Basic economics indicates that the cornerstones of economic progress are:

private ownership, freedom of exchange, competitive markets, and monetary Stability.

As the baby boomers begin moving into the retirement phase of life during the years following 2010, spending on Social Security and Medicare will

rise and this will make it more difficult for the federal government to balance its budget.

Competition among decentralized governmental units will

strengthen the incentive of governments to operate efficiently and cater to the views of citizens.

If government is going to provide an environment for economic prosperity

the self-interest of voters, politicians, and bureaucrats must be brought into harmony with efficient use of resources.