Suppose your community is considering using public money to build a new sports stadium for a new team that will only stay in the community if it is built for them. Suppose you are watching a news broadcast in which the supporters are saying that it is a good idea because, even though they don't go to the games, it is more fun to live in a town with a team and it is to live in a town without a team. The supporters are relying on the
A. stupidity of voters.
B. present value argument.
C. local substitution argument.
D. externality argument.
Answer: D
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Transfer payments refer to payments from the government to ________
A) other government agencies B) distribute state taxes collected by the government to individual states C) reimburse property taxes paid by states for government property leases D) certain individuals or groups
How can a buyer of car insurance help in reducing the effects of adverse selection?
What will be an ideal response?
When the Federal Reserve conducts open market purchases to increase bank reserves without trying to alter the interest rate that is already close to zero, the policy action is called
A) qualitative easing. B) quantitative easing. C) qualitative tightening. D) quantitative tightening.
The economy is in a recessionary gap. There is no crowding out and government has correctly estimated that to bring the economy into long-run equilibrium it should raise government purchases by $123 billion. If government purchases are raised by $123 billion, does it follow that the economy will be moved into long-run equilibrium?
A) Yes, because all the necessary conditions for effective fiscal policy are present. B) No, because the economy may be self-regulating, and by the time expansionary fiscal policy is effective, the AD curve may intersect the SRAS curve at an inflationary-gap level of Real GDP. C) Yes, because of the validity of the balanced budget theorem. D) No, because of inflexible wages and the fact that the SRAS curve is upward-sloping. E) none of the above