Question 1

Which of the following is most likely to result in government failure?

Accepted Answer

A)  Highly competitive markets. 
B)  Monopoly. 
C)  A constitutional reform mandating that the federal government maintain a balanced budget. 
D)  Widespread government actions that favor some business firms and sectors of the economy relative to others. 
A)  Highly competitive markets. 
B)  Monopoly. 
C)  A constitutional reform mandating that the federal government maintain a balanced budget. 
D)  Widespread government actions that favor some business firms and sectors of the economy relative to others.

Question 2

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2015?

Accepted Answer

A)  approximately 15 percent 
B)  approximately 25 percent 
C)  approximately 30 percent 
D)  approximately 36 percent 
A)  approximately 15 percent 
B)  approximately 25 percent 
C)  approximately 30 percent 
D)  approximately 36 percent

Question 3

Between 1930 and 1980, government expenditures as a percent of GDP in the United States

Accepted Answer

A)  more than tripled. 
B)  remained constant at 10 percent. 
C)  declined from 30 percent to 20 percent. 
D)  increased from 30 percent to 40 percent. 
A)  more than tripled. 
B)  remained constant at 10 percent. 
C)  declined from 30 percent to 20 percent. 
D)  increased from 30 percent to 40 percent.

Question 4

What impact did the National Industrial Recovery Act (NIRA) of 1933 have on industrial output?

Accepted Answer

A)  Industrial output had been declining, but it stabilized during the months following passage of the NIRA. 
B)  Industrial output increased sharply after the passage of the NIRA. 
C)  Industrial output had begun to increase, but it fell sharply following the passage of the NIRA. 
D)  Industrial output and employment declined during the months prior to passage of the NIRA, and the legislation was unable to stop the decline. 
A)  Industrial output had been declining, but it stabilized during the months following passage of the NIRA. 
B)  Industrial output increased sharply after the passage of the NIRA. 
C)  Industrial output had begun to increase, but it fell sharply following the passage of the NIRA. 
D)  Industrial output and employment declined during the months prior to passage of the NIRA, and the legislation was unable to stop the decline.

Question 5

During the Great Depression fiscal and monetary policy was characterized by

Accepted Answer

A)  an increase in tax rates and a contraction in the money supply. 
B)  a decrease in tax rates and a contraction in the money supply. 
C)  a decrease in tax rates and an expansion in the money supply. 
D)  an increase in tax rates and an expansion in the money supply. 
A)  an increase in tax rates and a contraction in the money supply. 
B)  a decrease in tax rates and a contraction in the money supply. 
C)  a decrease in tax rates and an expansion in the money supply. 
D)  an increase in tax rates and an expansion in the money supply.

Question 6

Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?

Accepted Answer

A)  Record-high unemployment rates for a period of many years. 
B)  A sharp and prolonged contraction in the money supply. 
C)  Significant increases in taxes and trade restrictions in order to counter budget deficits. 
D)  Frequent policy changes that generated an unstable and unpredictable economic climate. 
A)  Record-high unemployment rates for a period of many years. 
B)  A sharp and prolonged contraction in the money supply. 
C)  Significant increases in taxes and trade restrictions in order to counter budget deficits. 
D)  Frequent policy changes that generated an unstable and unpredictable economic climate.

Question 7

In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?

Accepted Answer

A)  The people who benefit from a government program pay the costs of the program roughly in proportion to the benefits that each receives. 
B)  The benefits are highly concentrated, and the costs are widespread among voters. 
C)  The costs are highly concentrated, and the benefits are widespread among voters. 
D)  The benefits accrue primarily in the future, while the costs are more visible during the current period. 
A)  The people who benefit from a government program pay the costs of the program roughly in proportion to the benefits that each receives. 
B)  The benefits are highly concentrated, and the costs are widespread among voters. 
C)  The costs are highly concentrated, and the benefits are widespread among voters. 
D)  The benefits accrue primarily in the future, while the costs are more visible during the current period.

Question 8

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Accepted Answer

A)  Trade restrictions are a good way for a country to increase the total employment and income level of its citizens. 
B)  As the experience during the 1930s illustrates, trade restrictions are an effective way to increase exports and tax revenues. 
C)  Trade restrictions provide gains to domestic residents at the expense of foreigners. 
D)  Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace. 
A)  Trade restrictions are a good way for a country to increase the total employment and income level of its citizens. 
B)  As the experience during the 1930s illustrates, trade restrictions are an effective way to increase exports and tax revenues. 
C)  Trade restrictions provide gains to domestic residents at the expense of foreigners. 
D)  Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace.

Question 9

Which one of the following is a major difference between market and collective action through government?

Accepted Answer

A)  Individuals are motivated by personal interests when making market choices, but they will be motivated primarily by the public interest when making collective choices. 
B)  Competitive behavior is present when decisions are made in the marketplace, but competition is absent when choices are made collectively. 
C)  Scarcity constrains output when decisions are made in the market sector, but scarcity is absent when goods are provided by the government. 
D)  In the market sector, there is generally a one-to-one link between payment and consumption; this link is often absent in the government sector. 
A)  Individuals are motivated by personal interests when making market choices, but they will be motivated primarily by the public interest when making collective choices. 
B)  Competitive behavior is present when decisions are made in the marketplace, but competition is absent when choices are made collectively. 
C)  Scarcity constrains output when decisions are made in the market sector, but scarcity is absent when goods are provided by the government. 
D)  In the market sector, there is generally a one-to-one link between payment and consumption; this link is often absent in the government sector.

Question 10

The rational-ignorance effect refers to the

Accepted Answer

A)  lack of incentive voters have to become well-informed about candidates and issues because their vote is unlikely to affect the outcome of an election. 
B)  fact that most people choose to become just as well-informed when making choices as consumers as they do when making choices as voters. 
C)  lack of rational analysis on the part of voters when they choose not to become informed about candidates and issues even though this knowledge would produce great personal benefit to them. 
D)  problem of not enough information being supplied to voters because politicians are not spending enough on campaign adds to inform voters of their positions on issues. 
A)  lack of incentive voters have to become well-informed about candidates and issues because their vote is unlikely to affect the outcome of an election. 
B)  fact that most people choose to become just as well-informed when making choices as consumers as they do when making choices as voters. 
C)  lack of rational analysis on the part of voters when they choose not to become informed about candidates and issues even though this knowledge would produce great personal benefit to them. 
D)  problem of not enough information being supplied to voters because politicians are not spending enough on campaign adds to inform voters of their positions on issues.

Question 11

Which of the following is an example of political action that reflects the shortsightedness effect?

Accepted Answer

A)  budget surpluses 
B)  the promise of future benefits without providing for their funding 
C)  spending on roads and highways 
D)  spending on programs that transfer income from the rich to the poor 
A)  budget surpluses 
B)  the promise of future benefits without providing for their funding 
C)  spending on roads and highways 
D)  spending on programs that transfer income from the rich to the poor

Question 12

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

Accepted Answer

A)  the difference in incentive structure motivating economic activity. 
B)  its ability to direct resources in a manner that is more economically efficient. 
C)  its ability to produce goods and services that people value. 
D)  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. 
A)  the difference in incentive structure motivating economic activity. 
B)  its ability to direct resources in a manner that is more economically efficient. 
C)  its ability to produce goods and services that people value. 
D)  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.

Question 13

If new regulations make it illegal to sell older model electrical appliances, then

Accepted Answer

A)  producers of new models that meet the regulations will see demand for their output rise. 
B)  consumers who might have purchased to older appliances are clearly made better off. 
C)  consumers are helped, but the profits of appliance producers are not affected. 
D)  consumers will certainly gain from the change. 
A)  producers of new models that meet the regulations will see demand for their output rise. 
B)  consumers who might have purchased to older appliances are clearly made better off. 
C)  consumers are helped, but the profits of appliance producers are not affected. 
D)  consumers will certainly gain from the change.

Question 14

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

Accepted Answer

A)  market failure legislation. 
B)  the rational-ignorance effect. 
C)  public-goods legislation. 
D)  pork-barrel legislation. 
A)  market failure legislation. 
B)  the rational-ignorance effect. 
C)  public-goods legislation. 
D)  pork-barrel legislation.

Question 15

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Accepted Answer

A)  Public-sector managers have no fear of bankruptcy when operational efficiency is not achieved. 
B)  Public-sector managers face fierce competition. 
C)  It is relatively easy for voters to detect operational inefficiency in the public sector and do something to correct it. 
D)  All of the above explain why government agencies have little incentive to be efficient. 
A)  Public-sector managers have no fear of bankruptcy when operational efficiency is not achieved. 
B)  Public-sector managers face fierce competition. 
C)  It is relatively easy for voters to detect operational inefficiency in the public sector and do something to correct it. 
D)  All of the above explain why government agencies have little incentive to be efficient.

Question 16

Which of the following explains why managers of government agencies have little incentive to achieve operational efficiency?

Accepted Answer

A)  Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. 
B)  Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. 
C)  Public-sector agencies typically do not face competition. 
D)  All of the above explain why government agencies have little incentive to be efficient. 
A)  Public-sector managers need not fear bankruptcy when operational efficiency is not achieved. 
B)  Public-sector managers seldom receive personal benefits if they find ways to improve the efficiency of their operations. 
C)  Public-sector agencies typically do not face competition. 
D)  All of the above explain why government agencies have little incentive to be efficient.

Question 17

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

Accepted Answer

A)  externalities 
B)  the rational-ignorance effect 
C)  the shortsightedness effect 
D)  well-informed consumers 
A)  externalities 
B)  the rational-ignorance effect 
C)  the shortsightedness effect 
D)  well-informed consumers

Question 18

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Accepted Answer

A)  productive (efficient) projects will tend to be opposed by a majority of voters. 
B)  counterproductive (inefficient) projects will often be favored by a majority of voters. 
C)  projects that are productive (efficient) will tend to be favored by an overwhelming majority of voters. 
D)  democratic political decision making can be expected to work poorly. 
A)  productive (efficient) projects will tend to be opposed by a majority of voters. 
B)  counterproductive (inefficient) projects will often be favored by a majority of voters. 
C)  projects that are productive (efficient) will tend to be favored by an overwhelming majority of voters. 
D)  democratic political decision making can be expected to work poorly.

Question 19

Did the fiscal policy of the 1930s bring an end to the Great Depression?

Accepted Answer

A)  No, government spending and budget deficits as a share of GDP were relatively small during the 1930s, and there is little evidence that fiscal policy did much to stimulate output. 
B)  No, even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939, this expansionary fiscal policy had little effect on output. 
C)  Yes, even though the spending programs of the New Deal led to budget deficits, they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D)  Yes, the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment. 
A)  No, government spending and budget deficits as a share of GDP were relatively small during the 1930s, and there is little evidence that fiscal policy did much to stimulate output. 
B)  No, even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939, this expansionary fiscal policy had little effect on output. 
C)  Yes, even though the spending programs of the New Deal led to budget deficits, they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D)  Yes, the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment.

Question 20

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Accepted Answer

A)  Concern that inflation would rise due to increases in real output and aggregate demand. 
B)  Expansionary fiscal policy designed to stimulate aggregate demand. 
C)  The Keynesian view that taxes should be increased during a recession. 
D)  The view that the federal government should maintain a balanced budget. 
A)  Concern that inflation would rise due to increases in real output and aggregate demand. 
B)  Expansionary fiscal policy designed to stimulate aggregate demand. 
C)  The Keynesian view that taxes should be increased during a recession. 
D)  The view that the federal government should maintain a balanced budget.

Which of the following is most likely to result in government failure?

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2015?

Between 1930 and 1980, government expenditures as a percent of GDP in the United States

What impact did the National Industrial Recovery Act (NIRA) of 1933 have on industrial output?

During the Great Depression fiscal and monetary policy was characterized by

Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?

In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Which one of the following is a major difference between market and collective action through government?

The rational-ignorance effect refers to the

Which of the following is an example of political action that reflects the shortsightedness effect?

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

If new regulations make it illegal to sell older model electrical appliances, then

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

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Which of the following explains why managers of government agencies have little incentive to achieve operational efficiency?

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

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Did the fiscal policy of the 1930s bring an end to the Great Depression?

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 6: The Economics of Political Action

Which of the following is most likely to result in government failure?

Combined federal, state, and local government expenditures in the United States were approximately 9 percent of the gross domestic product (GDP) in 1930. How large were government expenditures as a share of GDP in 2015?

Between 1930 and 1980, government expenditures as a percent of GDP in the United States

What impact did the National Industrial Recovery Act (NIRA) of 1933 have on industrial output?

During the Great Depression fiscal and monetary policy was characterized by

Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?

In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Which one of the following is a major difference between market and collective action through government?

The rational-ignorance effect refers to the

Which of the following is an example of political action that reflects the shortsightedness effect?

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

If new regulations make it illegal to sell older model electrical appliances, then

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

Which of the following factors explains why managers of government agencies have little incentive to achieve operational efficiency?

Which of the following explains why managers of government agencies have little incentive to achieve operational efficiency?

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

When the tax to fund a government project is allocated among voters in proportion to the benefits they receive from the project,

Did the fiscal policy of the 1930s bring an end to the Great Depression?

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters