L1: Introduction to Public Finance Flashcards

1
Q

2 major reasons for government intervention

A

market failure

redistribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

market failure

A

problem that causes the market economy to deliver an outcome that doesn’t maximise efficiency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

externality

A

example of a market failure

third-party affected by a transaction who isn’t part of it in the first place (positive/negative)

e.g. vaccination, pollution, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

internality

A

individual failures - mistakes by individuals that cause their decisions to not reflect their true preferences

consumer sovereignty, paternalism

e.g. smoking, not saving for retirement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

how might the government intervene?

A

taxes/subsidies

quotas/mandates

public provision

public financing of private provision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

effects of interventions

A

direct
- effects that would be predicted if individuals didn’t change their behaviour in response to the intervention

indirect
- effects that arise only because individuals change their behaviour in response to interventions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

redistribution

A

shifting of resources from some groups in society to others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

key facts surrounding government

A

government is larger in developed countries

government has grown over time

government spending has grown slower in the US than other countries

in the US, state and local spending is 1/3 of total government spending

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

budget surplus

A

government revenues (taxes) > spending

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

budget deficit

A

spending > government revenues (taxes)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly