The elite theory of government maintains that
A. Politicians who have held office for a long time are favored by the voters
B. Wealthy, politically powerful people control government, and government has no interest in meeting the needs of ordinary people
C. Special interest groups make government policy
D. None of the above
E. Poor people and people of color should not be allowed to vote
Answer: B. Wealthy, politically powerful people control government, and government has no interest in meeting the needs of ordinary people
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Real income can be measured by
A) the slope of the budget line. B) the area under the budget line. C) the length of the budget line. D) an intercept of the budget line.
If all the assumptions underpinning the policy irrelevance proposition are in place, fully anticipated monetary policy will
A) affect the unemployment rate but have no impact on the level of real Gross Domestic Product (GDP). B) have an impact on real Gross Domestic Product (GDP) but cannot alter the level of unemployment. C) effectively alter both the rate of unemployment and the level of real Gross Domestic Product (GDP). D) not change either the level of real Gross Domestic Product (GDP) or the unemployment rate.
Interest rates _______ in response to the Fed's actions. The short-term interest rates--the federal funds rate and the short-term bill rate--move ________.
Fill in the blank(s) with the appropriate word(s).
Suppose that lenders believe that the government will provide assistance if too many of the lenders' borrowers do not pay back their loans. If lenders expect government assistance they will:
A. make more loans to borrowers who are less likely to repay them. B. make fewer loans to borrowers who are less likely to repay them. C. increase the interest rates that they charge borrowers who are less likely to repay loans. D. not change their lending policies because this expectation is not reasonable.