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Unformatted text preview: Chapter 1 - Introduction Instructors Manual to accompany Public Finance, Seventh Edition, by Harvey S. Rosen Suggested Answers to End-of-Chapter Discussion Questions Some of the questions have no single correct answer reasonable people can go off in different directions. In such cases, the answers provided here sketch only a few possibilities. Chapter 1 - Introduction 1. a. Putins statement is consistent with an organic conception of government. Individuals and their goals are less important than the state. b. Rehnquist makes a clear statement of the mechanistic view of the state. 2. a. A person with an organic conception of the state might react favorably, arguing that even if an individual owner is worse off because he must show only French movies, the nation is better off because it achieves more unity. b. A libertarian would certainly reject this policy and the reasoning behind it -- there is no national interest independent of the interests of individuals, and people should have the right to run their lives in the way that they prefer -- including seeing whatever movies they want. c. A social democrat would try to balance these two aims, and it is hard to predict how he or she would come out. 3. The mechanistic view of government says that the government is a contrivance created by individuals to better achieve their individual goals. Within the mechanistic tradition, people could disagree on the obesity tax. Libertarians would say that people can decide what is best for themselves - whether to consume high calorie food - and do not need prodding from the government. In contrast, social democrats might argue that people are too short sighted to know what is good for them, so that government-provided inducements are appropriate. 4. a. If the size of government is measured by direct expenditures, the mandate does not directly increase it. Costs of compliance, however, may be high and would appear as an increase in a regulatory budget. b. Its hard to say whether this represents an increase or decrease in the size of government. One possibility is that GDP stayed the same, and government purchases of goods and services fell. Another is that government purchases of goods and services grew, but at a slower rate than the GDP. One must also consider coincident federal credit and regulatory activities and state and local budgets. Part 1 Getting Started c. The federal budget would decrease if grants-in-aid were reduced. However, if state and local governments offset this by increasing taxes, the size of the government sector as a whole would not go down as much as one would have guessed. 5. The inflation erodes the real value of the debt by 0.021 x 311 billion or 6.5 billion. The fact that inflation reduces the real debt obligation means that this figure should be included as revenue to the government....
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This note was uploaded on 01/20/2012 for the course MGT 104 taught by Professor Tim during the Spring '11 term at Aims Community College.
- Spring '11