Chapter 1

Question 1

Government Purchases

Answer 1

Those that require productive resources (land, labor, and capital) to be diverted from private use by individuals and corporations so that such resources can be used by the government.

Question 2

Government Transfer Payments

Answer 2

Government expenditures that redistribute purchasing power among citizens

Question 3

Governments

Answer 3

Organizations formed to exercise authority over the actions of people who live together in a society and to provide finance essential services.

Question 4

Mixed Economy

Answer 4

An economy in which government supplies a considerable amount of goods and services and regulated private economic activity

Question 5

Nonmarket Rationing

Answer 5

Distribution where government goods and services are not made available to persons according to their willingness to pay and their use is not rationed by prices

Question 6

Political Institutions

Answer 6

Institutions that constitute the rules and generally accepted procedures that evolve in a community for determining what government does and how government outlays are financed

Question 7

Private Goods and Services

Answer 7

Items (such as food and clothing) usually made available for sale in markets

Question 8

Public Finance

Answer 8

The field of economics that studies government activities and the alternative means of financing government expenditures.

Question 9

Pure Market Economy

Answer 9

An economy in which virtually all goods and services would be supplied by private firms for profit and all exchanges of goods and services would take place through markets, with prices determined by free interplay of supply and demand.

Question 10

Government Goods and Services

Answer 10

Goods and services (such as roads, schooling, and fire protection) that are not usually sold in markets