Economics Exam 3
Which of the following is the best example of citizens "voting with their feet"?
A. Citizens choose where to live based on the service offered and the level of taxation
Competition among decentralized governmental units will
C. strengthen the incentive of governments to operate efficiently and cater to the views of citizens
Why are lobbying and other activities designed to acquire favors from the government often described as "plunder"?
D. These activities consume resources that would otherwise be used to create wealth and generate income
Special interest issues are politically attractive because
D. special interest groups feel strongly about these issues, while most other voters are poorly informed
Which of the following is most necessary for a market economy to efficiently satisfy consumers?
B. Competition and open entry into markets
When legislators trade votes on one issue for the votes of other legislators on other issues is called
C. logrolling
Once the criterion for receipt of an income transfer is established,
D, people will modify their behavior in order to qualify for the transfer, decreasing their net gain from the transfer
Why is the market process more likely to approve productive projects and reject unproductive projects, than the political process?
D. In the market, projects will continue to be undertaken only if they generate revenues that are sufficient to cover their cost
which strategy is most likely to restrain excessive spending by the federal government?
D. a Constitutional rule requiring three fourths approval of both House of Congress for spending proposals
Which of the following is true of central planning?
D. all the above
Which of the following is the best example of a public good?
D. an anti missile system surrounding the city of Washintgon D.C
Governments promote growth and prosperity when they
D. encourage productive activity and discourage plunder
Public goods are often difficult for markets to allocate efficiently because
D. it is difficult to establish a one to one link between payment for and receipt of theses goods
The distinctive feature of the American political process and the key to economic progress is
D. limited and decentralized government, protection of people and their property from aggressors and provision of a limited set of public goods
As personal income tax rates are increased
D. the incentive to engage in tax-avoidance activity decreases
Which of the following is the best indication that a project is economically productive?
D. the total benefits exceed total costs
General agreement exists that the legitimate economic functions of government include
D.all of the above
Which of the following explains why pork barrel spending is often approved, even when the spending is inefficient?
D.all of the above
Which of the following is a characteristic of "public goods"?
A. It is difficult to restrict their availability to paying customers
If students who earn an A in a class were asked to transfer some of their points to low performing students, which of the following would be likely to occur?
A. Neither high nor low performing students would work as hard to earn additional points
Which of the following is most likely to undermine long run growth?
A. high taxes, excessive regulation, and persistent inflation
When the government becomes heavily involved in taxing some in order to make income transfers to others?
A. people will spend more time organizing and lobbying politicians and less time producing goods and services
The fact that voters perceive their votes as unlikely to actually change election outcomes causes
A. voters to have little incentives to become informed about candidates and political issues
Which statement best explains why legislators find debt financing more attractive that taxation?
A.The current cost of debt financing is less visible than taxation
Which of the following is true?
B. In a market economy, the link between productivity and income provides individuals with an incentive to provide resources that are highly values by others
Various subsidy programs in the U.S illustrates that when the benefits are concentrated among targeted producers and the costs are widespread among unorganized consumers, the political process leads to
B. inefficient and wasteful use of resources
Federal spending is something like a common pool resource,because
B. interest groups will figure that if they do not grab more of the federal budget, other groups will
If a government is going to promote economic progress, which of the following is the most important?
B. protection of people and their property form aggressors and the provisions of a few goods that are difficult to supply through markets
As taxes are increased to finance more income transfers
B. support for the income transfers among the recipients will increase
Economic analysis indicates that higher unemployment benefits will
B.lead to more lengthy spells of unemployment and higher unemployment rate
Why is there little incentive for legislators to fight for an overall reduction in government spending?
C. If a legislator is able to achieve overall spending cuts, most of the benefits will accrue to voters in his district, as well as the other 434 districts equally
Which of the following factors explains why the managers if government agencies and firms have only a weak incentive to keep a cost low and operate efficiently?
C. Public sector managers have no fear of losses and bankruptcy if operational efficiency is not achieved
Transfers and subsidies currently account for
C. approximately 50 percent of the federal budget
The productive function of government is vitally important in order to
C. assure people that they will be permitted to keep most of what they can earn
Taxes for the financing of government projects involve coercion because
C. dissenting minorities must help pay for the project even though they are opposed to it
Government is most likely to align the self-interest of voters, politicians, and bureaucrats with economic progress, when
C. it is limited in scope and remain neutral among the various subgroups of citizens
When the federal government becomes heavily involved in levying taxes on some in order to finance programs that benefit well organized interest groups, the expected result is
C. less rapid economic growth, because of increased rent seeking and adoption of counterproductive spending programs
The framers of the U.S Constitution sought to design a political system that would
C. limit the powers of the federal government and protect the rights of individuals
The political structure that is most consistent with economic growth and progress is
C. limited government, protection of individuals from aggression by others, and decentralized political decision making
A government fulfills a protective function when it
C. prevents illegal seizure of private property
As the baby boomers began moving into the retirement phase of life during the years following 2010, spending on Social Security and Medicare will
C. rise and this will make it more difficult for the federal government to balance its budget
When managing budgets, a government agency will have the incentive to
C. spend all of its allotted budget so that i can make a case for a larger budget next year
When enterprises get more funds from government subsidies provided by central planners and less from consumers, they will have incentive to
C. spend more time trying to influence politicians and less time trying to reduce costs and please customers
When decentralized governmental units operate independently and compete with each other, governments will attract residents and expand their tax base as
C. they provide residents with desired services at an attractive tax cost
When the government is heavily involved in projects that provide benefits to some businesses at the expense of others, this will increase the incentive of business to
C.spend more time lobbying and seeking government favors
Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?
D. an increase in rent-seeking activity
Which of the following will improve the efficiency of government and help protect individuals from exploitation by their government>
D. competition among decentralized government units
The economic way of thinking indicates that personal benefits and costs influence the actions of
D. consumers, producers, voters, and politicians in both the private and the public sectors
The persistent budget deficits of recent decades are
D. expected, because politicians have incentive to spend on current programs financed by borrowing
which of the following explains why democratic decision-making often leads to the adoption of counterproductive projects?
D.all the above
