Attempts to alleviate poverty have included all of the following income-maintenance programs EXCEPT
A. temporary assistance to needy families.
B. Social Security.
C. 401(k) plans.
D. food stamps.
Answer: C
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The largest single transfer program at the federal level is
A. Social Security. B. unemployment compensation. C. farm subsidies. D. the agricultural support program.
What is the theory of bureaucratic behavior and how can it be used to explain the behavior of the Federal Reserve?
What will be an ideal response?
A 10 percent increase in gasoline prices reduces gasoline consumption by about
a. 6 percent after one year and 2.5 percent after five years. b. 2.5 percent after one year and 6 percent after five years. c. 10 percent after one year and 20 percent after five years. d. 0 percent after one year and 1 percent after five years.
Some firms provide stock options to managers as an incentive to work hard and increase the value of the firm. A typical option contract gives the manager the right to buy the firm's stock at a set price (known as the exercise price)
If the firm's stock value increases and moves above the exercise price, then the manager's option becomes more valuable. What is the potential problem with this incentive scheme? A) The incentive does not include a performance benchmark, so it cannot be optimal. B) There is a dynamic incentive problem --- the manager may focus too much on the firm's short-run stock value and not on actions that are in the best interest of the firm for the long run. C) The incentive value depends on the firm's stock value, which cannot be influenced by the amount of work or effort exerted by the manager. D) There are no problems with this incentive scheme.