Deck 1: Individuals and Government

Question 1

The costs imposed by government regulations on business firms are included in budget data on government expenditures.

Answer 1

False

Question 2

State governments do not fund any part of Medicaid.

Answer 2

False

Question 3

If the economy is currently operating on a point on the production possibility curve for government goods and services versus private goods and services,

A) an annual increase in government goods and services can be obtained without any sacrifice of annual private goods and services.
B) it will be impossible to increase annual output of government goods and services.
C) a decrease in the annual output of government goods and services will have no effect on the annual output of private goods and services.
D) a decrease in the annual output of government goods and services will allow an increase in annual output of private goods and services.

Answer 3

a decrease in the annual output of government goods and services will allow an increase in annual output of private goods and services.

Question 4

The federal government obtains about half of its revenue annually from retail sales taxes.

Question 5

Since 1959, the percent of federal government expenditures devoted to transfers has increased by more than 50 percent.

Question 6

Government consumption does not require resources to be reallocated from private to government use.

Question 7

In 1929, the federal government spent more than was spent by state and local governments.

Question 8

On average, persons in the United States devote more of their annual budgets to taxes than they do to food.

Question 9

The proportion of revenue received by the federal government from payroll taxes is higher than the proportion of revenue received by state and local governments from payroll taxes.

Question 10

The social compact is an 18^th century idea by political theorists.

Question 11

Interest on the federal government's debt accounts for nearly one-quarter of federal government expenditure.

Question 12

Federal grants-in-aid to state and local governments finance about 20 percent of annual spending by these governments.

Question 13

Since 1930, the percent of GDP devoted to government expenditures has more than tripled.

Question 14

Sales taxes account for about 22 percent of state and local government revenue in the United States.

Question 15

Transfer payments, including Social Security and welfare and medical assistance, account for nearly 60 percent of federal government expenditures.

Question 16

The federal government allocates about 10 percent of its budget to Social Security.

Question 17

The real cost of government goods and services is:

A) money.
B) taxes.
C) the private goods and services foregone.
D) inflation.

Question 18

A universally observed function of government is the establishment of property rights.

Question 19

State and local governments in the United States spend a bit more than one-third of their budgets on education.

Question 20

The total share of GDP accounted for by government spending in the United States has declined significantly since 1980.

Question 21

The U.S. economy is best characterized as a:

A) pure market economy.
B) socialist economy.
C) pure capitalistic, free-enterprise system.
D) mixed economy.

Question 22

A mixed economy is one in which:

A) there are no markets.
B) government activity accounts for a significant proportion of the value of goods and services produced.
C) there is no government.
D) all goods and services are sold in markets.

Question 23

Total annual expenditures by federal, state, and local governments in the United States are in the range of:

A) 20 to 25 percent of annual GDP.
B) 25 to 30 percent of annual GDP.
C) 35 to 40 percent of annual GDP.
D) 45 to 50 percent of annual GDP.

Question 24

Federal government expenditures in the United States account for about:

A) 25 percent of annual GDP.
B) 35 percent of annual GDP.
C) 45 percent of annual GDP.
D) 55 percent of annual GDP.

Question 25

Transfer payments by the federal government in the United States account for about:

A) 25 percent of federal government expenditures.
B) 10 percent of federal government expenditures.
C) 40 percent of GDP.
D) 60 percent of federal government expenditures.

Question 26

Following the circular flow of a mixed economy, which entity or entities distribute resources?

A) Firms only.
B) Input Markets only.
C) Government and Households.
D) Households and Input Markets.

Question 27

In 2011, which country listed below has the highest percentage of government spending relative to GDP?

A) France.
B) Ireland.
C) Japan.
D) Canada.

Question 28

Taxes:

A) are prices paid for the right to consume government goods and services.
B) are compulsory payments not directly related to the benefits received from government goods and services.
C) never affect economic incentives.
D) are used by private firms to raise revenue.

Question 29

State and local government expenditure in the United States accounts for about:

A) 32 percent of GDP.
B) 22 percent of GDP.
C) 12 percent of GDP.
D) 7 percent of GDP.

Question 30

Government goods and services are usually:

A) not rationed by prices.
B) sold in markets.
C) made available to persons according to their willingness and ability to pay.
D) financed by revenue obtained from sales.

Question 31

About 80 percent of federal receipts are accounted for by:

A) corporate profits taxes.
B) sales taxes.
C) excise taxes.
D) payroll and personal income taxes.

Question 32

Nonmarket rationing means that:

A) those willing to pay can buy as much of a product as they choose.
B) prices are used to sell products.
C) goods and services are not rationed by prices.
D) willingness to pay is not a factor in determining who can enjoy a good or service.
E) both c and d

Question 33

Government purchases for consumption and investment:

A) are made to acquire resources necessary to produce government goods and services.
B) are designed to redistribute purchasing power among citizens.
C) have increased in importance as a percent of federal spending since 1959.
D) do not withdraw resources from private use.

Question 34

Which of the following is an example of a political institution?

A) a market
B) elections with winners determined by majority rule
C) representative government
D) both b and c

Question 35

The old-age dependency ratio is:

A) the proportion of the population that is 60 years or older over the proportion of the population that is less than 60 years of age.
B) the proportion of the population that is 65 years or older over the proportion of the population that is 15 to 64 years of age.
C) the proportion of the population that is 70 years or older over the proportion of the population that is 20 to 69 years of age.
D) the total government expenditure on programs for the elderly over the number of citizens that are 65 years or older.

Question 36

If the economy is operating at full employment and using resources efficiently, then an increase in spending for homeland security this year will:

A) require that resources be reallocated to homeland security services without sacrificing any alternative goods and services.
B) be possible if resources are reallocated to homeland security services, but it will also mean that the output of some other goods and services will have to fall.
C) be impossible.
D) be possible only if there is an improvement in technology or more resources made available.

Question 37

When has the U.S. experienced government expenditures in the range of 40% to 50% of GDP?

A) 2000 to 2009.
B) 1950 to 1959.
C) 1940 to 1949.
D) It has never happened.

Question 38

Taxes are likely to affect the incentives that persons have to use their own resources in the most productive way. Suppose that the taxes used to finance G₁ units of government goods and services could purchase X₁ units of private goods and services. Assume that more than X₁ units of private goods and services could be produced if taxes did not impair incentives to produce. Use the production possibility curve to illustrate the effect of taxes on the output mix in the economy. Show the loss in private output from taxes on your graph. Show how an improvement in the technology of producing government goods and services will affect the production possibility curve.

Question 39

Following the circular flow of a mixed economy, firms receive a flow of dollars from and send goods and services to:

A) Output Markets.
B) Input Markets.
C) Households.
D) Government.