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1、Instructors Manualto accompanyPublic FinanceSeventh EditionSuggested Answers to Discussion Questionsand Sample Examsby Harvey S. RosenMarch 2004McGraw-Hill/Irwin 2004Suggested Answers to Discussion QuestionsSome of the questions have no single “correct” answer reasonable people can go off in differe
2、nt directions. In such cases, the answers provided here sketch only a few possibilities.Chapter 11.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
3、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 rea
4、soning 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
5、 how he or she would come out.3.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
6、best for themselves. They do not need prodding from the government. In contrast, social democrats might believe 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, t
7、he 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 purch
8、ases 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.c. The federal budget would decrease if grants-in-aid were reduc
9、ed. 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 0.032 x 332 billion or 10.6 billion. This figure should be included as re
10、venue to the government.6.The federal government grew by $450 billion. However, because the price level went up by 16 percent, in terms of 2001 dollars this amounted to a decrease of $224 billion (=$1.86 trillion - 1.16x$1.41 trillion). As a proportion of GDP, federal spending in 1993 was 21.2 perce
11、nt and in 2001 it was 18.2 percent. Hence, by both measures, the size of government fell. To get a more complete answer, one would want data on the population (to compute real spending per capita). Also, it would be useful to add in expenditures by state and local governments, to see if the total si
12、ze of government fell. Also, although it would be harder to measure, one would want to try to gain some sense of how the regulatory burden on the economy grew during this time period.Chapter 21.The reality that astronomers are trying to understand is not influenced by any “policies” that astronomers
13、 might implement. Moreover, the parameters with which astronomers must deal are constant over time, while the parameters in economics can change across time and space.2.A change in the marginal tax rate changes the individuals net wage. This generates both an income effect and a substitution effect.
14、 As long as leisure is a normal good, these effects work in opposite directions. Hence, one cannot tell a priori whether labor supply increases or decreases. One could ask taxpayers to describe how they would change their behavior under the proposal, but it is hard to imagine that this would yield u
15、seful results. In a social experiment, a control group would confront the status quo, and an experimental group would face the new tax regime. This is clearly infeasible. Econometric investigation of labor supply seems the best approach, particularly if data associated with past changes in tax rates
16、 can be brought to bear on the problem.3.Generally, economic outcomes are affected by a number of variables. Economists cannot perform controlled randomize experiments, which makes it difficult to assess how any single variable affects a given outcome. Similarly, brain impairment may be due to a number of factors. Ecstasy users clearl
