Question 1

One major role that the government plays in the market economy of the U.S. is:

Accepted Answer

A)  Setting production targets for major industries 
B)  Requiring minimum levels of employment in major industries 
C)  Allocating resources in various market activities 
D)  Setting laws governing economic activity 
A)  Setting production targets for major industries 
B)  Requiring minimum levels of employment in major industries 
C)  Allocating resources in various market activities 
D)  Setting laws governing economic activity

Question 2

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

Accepted Answer

A)  The paradox of voting 
B)  The influence of the median voter 
C)  The power of special-interest groups 
D)  The allocative efficiency of government 
A)  The paradox of voting 
B)  The influence of the median voter 
C)  The power of special-interest groups 
D)  The allocative efficiency of government

Question 3

A budget deficit is another name for the public debt.

Accepted Answer

A) True 
 B)False

Question 4

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

Accepted Answer

A)  Many state and local governments have balanced-budget laws that make deficits illegal, while the Federal government does not 
B)  Voters in Federal elections tend to favor budget deficits, while voters in state and local elections do not 
C)  Many state and local governments face stricter accounting standards than the Federal government does 
D)  Elections at the state and local levels tend to occur more frequently than at the Federal level 
A)  Many state and local governments have balanced-budget laws that make deficits illegal, while the Federal government does not 
B)  Voters in Federal elections tend to favor budget deficits, while voters in state and local elections do not 
C)  Many state and local governments face stricter accounting standards than the Federal government does 
D)  Elections at the state and local levels tend to occur more frequently than at the Federal level

Question 5

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

Accepted Answer

A) True 
 B)False

Question 6

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

Accepted Answer

A)  Politicians may not be objective in evaluating economic policy programs 
B)  Because of the importance of television and other modern communication techniques, the best and brightest candidates may not be selected by voters 
C)  In an election, voters must select a candidate who has various preferences in a wide array of issues 
D)  The most economically efficient public policy programs may not be selected because political leaders do not know enough about economics 
A)  Politicians may not be objective in evaluating economic policy programs 
B)  Because of the importance of television and other modern communication techniques, the best and brightest candidates may not be selected by voters 
C)  In an election, voters must select a candidate who has various preferences in a wide array of issues 
D)  The most economically efficient public policy programs may not be selected because political leaders do not know enough about economics

Question 7

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Accepted Answer

A)  Median-voter trading 
B)  The special-interest effect 
C)  Political logrolling 
D)  The paradox of voting 
A)  Median-voter trading 
B)  The special-interest effect 
C)  Political logrolling 
D)  The paradox of voting

Question 8

Majority voting fails to incorporate the strength of the preferences of individual voters, and therefore:

Accepted Answer

A)  Reduces the power of the median voter 
B)  Is the primary reason for public sector failure 
C)  May produce economically inefficient outcomes 
D)  Creates the opportunity for the fallacy of limited decisions 
A)  Reduces the power of the median voter 
B)  Is the primary reason for public sector failure 
C)  May produce economically inefficient outcomes 
D)  Creates the opportunity for the fallacy of limited decisions

Question 9

Loan guarantees provided by the government for specific private-sector investments tend to:

Accepted Answer

A)  Generate high positive returns for the government 
B)  Increase the financial risk faced by the private investors 
C)  Attract private investors into the specific project 
D)  Eliminate the moral hazard problem among investors 
A)  Generate high positive returns for the government 
B)  Increase the financial risk faced by the private investors 
C)  Attract private investors into the specific project 
D)  Eliminate the moral hazard problem among investors

Question 10

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Accepted Answer

A)  Political logrolling 
B)  Progressive taxation 
C)  Proportional taxation 
D)  The paradox of voting 
A)  Political logrolling 
B)  Progressive taxation 
C)  Proportional taxation 
D)  The paradox of voting

Question 11

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

Accepted Answer

A)  Reduces private-sector economic risk 
B)  Increases private-sector economic risk 
C)  Reduces the market's economic efficiency 
D)  Increases the economy's deadweight losses 
A)  Reduces private-sector economic risk 
B)  Increases private-sector economic risk 
C)  Reduces the market's economic efficiency 
D)  Increases the economy's deadweight losses

Question 12

Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed public good has a total cost of $1000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $400 each to Abby, Ben, and Clara. Based on economic analysis, the public good should:

Accepted Answer

A)  Be produced, because the benefits are greater than the costs 
B)  Not be produced, because the costs are greater than the benefits 
C)  Be put to a vote, and produced only if voters approve it 
D)  Not be produced, even if voters vote in favor of it 
A)  Be produced, because the benefits are greater than the costs 
B)  Not be produced, because the costs are greater than the benefits 
C)  Be put to a vote, and produced only if voters approve it 
D)  Not be produced, even if voters vote in favor of it

Question 13

If the government runs a smaller budget deficit, then the public debt will decrease.

Accepted Answer

A) True 
 B)False

Question 14

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will most likely be:

Accepted Answer

A)  Accepted; the public good is produced even though it is economically inefficient 
B)  Defeated; the public good is not produced even though it would have been efficient to do so 
C)  Accepted; the public good is produced which is economically efficient 
D)  Defeated; the public good is not produced, which is the proper outcome 
A)  Accepted; the public good is produced even though it is economically inefficient 
B)  Defeated; the public good is not produced even though it would have been efficient to do so 
C)  Accepted; the public good is produced which is economically efficient 
D)  Defeated; the public good is not produced, which is the proper outcome

Question 15

Which would be an avenue for resolving the inefficiencies associated with majority voting?

Accepted Answer

A)  The paradox of voting 
B)  Progressive taxation 
C)  Proportional taxation 
D)  Special interest groups 
A)  The paradox of voting 
B)  Progressive taxation 
C)  Proportional taxation 
D)  Special interest groups

Question 16

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

Accepted Answer

A)  Tax rates 
B)  Interest rates 
C)  Wage rates 
D)  Government spending 
A)  Tax rates 
B)  Interest rates 
C)  Wage rates 
D)  Government spending

Question 17

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters). This is known as the:

Accepted Answer

A)  Principal-agent problem 
B)  Limited and bundled choice problem 
C)  Rent-seeking behavior problem 
D)  Lack of accountability problem 
A)  Principal-agent problem 
B)  Limited and bundled choice problem 
C)  Rent-seeking behavior problem 
D)  Lack of accountability problem

Question 18

Inefficiencies associated with majority voting may get resolved through:

Accepted Answer

A)  Using the median-voter model 
B)  Bureaucratic inefficiency 
C)  The paradox of voting 
D)  Political logrolling 
A)  Using the median-voter model 
B)  Bureaucratic inefficiency 
C)  The paradox of voting 
D)  Political logrolling

Question 19

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. In a majority vote, this proposal will most likely be:

Accepted Answer

A)  Accepted; four in favor and one against 
B)  Defeated; one in favor and four against 
C)  Accepted; three in favor and two against 
D)  Defeated; two in favor and three against 
A)  Accepted; four in favor and one against 
B)  Defeated; one in favor and four against 
C)  Accepted; three in favor and two against 
D)  Defeated; two in favor and three against

Question 20

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Accepted Answer

A) True 
 B)False

One major role that the government plays in the market economy of the U.S. is:

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

A budget deficit is another name for the public debt.

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Majority voting fails to incorporate the strength of the preferences of individual voters, and therefore:

Loan guarantees provided by the government for specific private-sector investments tend to:

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

If the government runs a smaller budget deficit, then the public debt will decrease.

Which would be an avenue for resolving the inefficiencies associated with majority voting?

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters). This is known as the:

Inefficiencies associated with majority voting may get resolved through:

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 5: Governments Role and Government Failure

One major role that the government plays in the market economy of the U.S. is:

What is a likely explanation for why the budget of a government agency might increase beyond its optimal size?

A budget deficit is another name for the public debt.

In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:

The special interest effect in government is the reason why firms in some industries are willing to pay huge amounts of money to lobbyists.

The concept of limited and bundled choice, as used in public choice theory, refers to the fact that:

The trading of votes to secure favorable outcomes on decisions which would otherwise be defeated is called:

Majority voting fails to incorporate the strength of the preferences of individual voters, and therefore:

Loan guarantees provided by the government for specific private-sector investments tend to:

Which of the following would be an avenue for resolving the inefficiencies associated with majority voting?

Making blackmail, extortion, and other forms of private coercion illegal is one way that government:

If the government runs a smaller budget deficit, then the public debt will decrease.

Which would be an avenue for resolving the inefficiencies associated with majority voting?

Monetary policy refers to the government's attempt at smoothing business cycles through the use of changes in:

In presidential elections, voters often find that they do not agree with any single candidate on all the issues that matter to them (the voters). This is known as the:

Inefficiencies associated with majority voting may get resolved through:

The "pork" in pork-barrel politics refers to government projects that politicians try to secure in favor of the common good for the whole nation.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters