B) False. C) Uncertain. Ans: a Essay
30. Write an essay discussing some of the reasons that federal expenditures for Social Security have increased since 1965.
Ans: Federal expenditures for Social Security have increased since 1965 for several reasons, including increases in the number of persons entitled to benefits and the introduction of Medicare and other programs.
31. Do you think it is correct policy that the federal government is not required to finance all of its expenditures with tax revenues and is allowed to borrow? What are the implications of this policy?
Ans: Answers will vary, but financing out of current spending ensures that there are no deficits at the end of the fiscal year. However, in times of crisis, such as war, this type of financing would limit the government’s ability to accomplish its stated goals.
32. Why do/should we care that federal expenditures are becoming an increasingly larger portion of GDP?
Ans: We should care that federal expenditures are becoming an increasingly larger portion of GDP because of public sector crowding out.
33. Discuss your views on government intervention regarding obesity.
Ans: As with many social issues, obesity will not only impact the health of the population but the ability of people to work and be productive members of society. Some will argue that this is a private issue and the government has no role in regulating how much food or the types of food that individuals consume.
Chapter 2
Tools of Positive Analysis
Multiple-Choice
1. Positive economics
A) does not depend on market interactions.B) only looks at the best parts of the economy. C) examines how the economy actually works (as opposed to how it should work).D) is very subjective. Ans: c
2. The Law of Demand states
A) that there is an inverse relationship between price and quantity demanded. B) that the judicial branch of government sets demand schedules.
C) that laws can have no effect on market economies.D) none of the above. Ans: a
3. The function Y = f(X,Z) means
A) X multiplied by Y equals f.B) X + Y = Z.
C) Y is a function of both X and Z.D) none of the above.