Public choice economists believe that:
A. incentives encourage government to provide a policy that its voting constituency likes.
B. government is not subject to the laws of supply and demand.
C. incentives encourage government to achieve its goal in the least-cost manner.
D. government does not weigh the costs and benefits of various programs.
Answer: A
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Expenditures in GDP do not include
A) used goods or financial assets. B) financial assets or investment. C) used goods or investment. D) investment, stocks, or bonds. E) government expenditures on goods and services.
Adam Smith, the father of modern economics wrote in his book, An Inquiry into the Nature and Causes of the Wealth of Nations, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner but from their regard to
their own interest." Explain what he meant by that statement and how such behavior promotes the wealth of a nation.
A person's marginal tax rate equals
a. her tax obligation divided by her average tax rate. b. the increase in taxes she would pay as a percentage of the rise in her income. c. her tax obligation divided by her income. d. the increase in taxes if her average tax rate were to rise by 1percent.
In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y ? 20,000r, the interest rate is currently 2 percent (0.02). If potential output equals 8,000, the central bank must ________ the interest rate to close the ________ gap.
A. raise; recessionary B. lower; expansionary C. raise; expansionary D. lower; recessionary