Please answer all multiple choice and short answer questions 

Quiz 3

Gruber Chapter 10: State and Local Government Expenditures

Instructions: Please answer all multiple choice and short answer questions and submit your responses as file attachment.

1.

Which of the following is NOT true about the No Child Left Behind (NCLB) program?

A)

NCLB addressed the substandard educational opportunities for poor and minority children by requiring standardized testing.

B)

The legislation was first introduced by President George W. Bush in 2002.

C)

NCLB allowed teachers to teach the subject rather than teach to the tests.

D)

NCLB represented the greatest expansion of federal power over schools in half a century.

2.

The key questions addressed in this chapter are:
I. How does the provision of private goods at the local level impact their optimality?
II. How should different types of spending be shared between different levels of government?
III. What are the impacts of government grants designed to share spending across levels of government?

A)

I only

B)

I and II only

C)

II and III only

D)

I and III only

3.

Optimal fiscal federalism is the question of:

A)

which states perform efficiently and which do not.

B)

how much interstate redistribution of wealth by the federal government is appropriate.

C)

how much tax revenue should be collected by the federal government and allocated to the state governments.

D)

which activities should take place at which level of government.

4.

The share of spending by the federal government was _____ of all government spending in 1902 and ______ significantly over the next 50 years.

A)

34%; increased

B)

34%; decreased

C)

66%; increased

D)

66%; decreased

5.

Which of the following is NOT a fundamental reason for the increase in the share of federal government spending in total government spending?

A)

the Sixteenth Amendment to the Constitution, which allowed the federal government to levy income taxes on individual citizens

B)

New Deal programs of the 1930s in response to the Great Depression

C)

introduction of large social insurance and welfare programs by the federal government

D)

increase in the number of programs mandated by the federal government but funded at the state or local level

6.

On the spending side, which is NOT a large element of federal spending:

A)

health care.

B)

education.

C)

Social Security.

D)

national defense.

7.

On the spending side, which is NOT a large element of state and local spending:

A)

health care.

B)

education.

C)

Social Security.

D)

public safety.

8.

A major source of tax revenue at the local level is:

A)

income taxes.

B)

property taxes.

C)

sales taxes.

D)

capital gains taxes.

9.

Fiscal equalization refers to the fact that:

A)

the national government distributes grants to subnational governments to equalize differences in wealth.

B)

subnational governments raise money from their citizens, and varying portions of those proceeds are taxed by the national government.

C)

collectively, spending by subnational governments is equal to spending by the national government.

D)

collectively, subnational governments collect taxes equal to those collected by the national government.

10.

In _____, there has been increased efforts to shift control and financing of public programs to subnational governments.

A)

China

B)

the United Kingdom

C)

Greece

D)

South Korea

11.

In 2009, which state spent the most per capita on education?

A)

Wisconsin

B)

California

C)

Alaska

D)

Florida

12.

If the federal government gives a grant to a state to spend only on education and total state education spending does not increase at all, which of the following is TRUE empirically? Assume that education is a normal good.

A)

There is a flypaper effect.

B)

There is a substantial substitution effect.

C)

There is NO income effect.

D)

There is both an income effect and a substitution effect.

13.

If the Tiebout mechanism fails, which of the following should be done?

A)

Redistribute income from poor to rich communities.

B)

Redistribute from rich to poor communities.

C)

Do not redistribute at all.

D)

Link local taxes to local spending.

14.

Which of the following is a conditional block grant?

A)

$4 million to be spent on education

B)

up to $4 million to be spent as the state sees fit

C)

$4 million to the state government to be spent on any state program

D)

a $1 increase in federal grant money for every $1 spent by the state

15.

According to the Tiebout model, how would you respond if you didn’t like the level of services provided in your community?

A)

You’d use voter initiatives to change the level of services.

B)

You’d vote out the local officials in the next general election.

C)

You’d vote out the local officials by calling a recall election.

D)

You’d move to a different community.

16.

In the Tiebout model, public goods are provided __________ at the local level due to the preference revelation device of _________.

A)

inefficiently; general elections

B)

efficiently; recall elections

C)

inefficiently; mobility

D)

efficiently; mobility

17.

The Tiebout model is most likely to apply to:

A)

the county government.

B)

the state government.

C)

the national government.

D)

the city government.

18.

Which of the following would prevent the Tiebout result?

A)

rich people paying the same in taxes as poor people

B)

individuals not being perfectly mobile

C)

many different communities for individuals to choose from

D)

variation in public services among communities

19.

An implication of the Tiebout model is that there is _________ similarity in preferences among people living in urban areas than in rural areas, and people in __________ areas are more satisfied with the level of public goods spending.

A)

less; urban

B)

more; urban

C)

less; rural

D)

more; rural

20.

If the Tiebout model holds perfectly in reality, which of the following is TRUE?

A)

Education should be funded at the local level.

B)

We should redistribute wealth across communities.

C)

We should not redistribute wealth within communities.

D)

Taxes should be the same in all communities.

21.

Suppose two individuals have identical incomes. One of them has a house worth $100,000 and the other has a house worth $200,000. The local government levies a tax of $500 on each of them, as it does on the homes of the rest of its residents. What kind of tax is this?

A)

a property tax

B)

a benefit tax

C)

an income tax

D)

a lump-sum tax

22.

Individuals who wish to live in a community with individuals richer than they are but without paying higher property taxes are hoping to receive the benefits of the:

A)

free rider effect.

B)

slum effect.

C)

neighborhood effect.

D)

Tiebout effect.

23.

Which of the following is consistent with the assumptions in the Tiebout model?

A)

Local governments raise money using property taxes.

B)

Public parks in one town also benefit neighboring towns.

C)

Policing in one town does not affect criminal behavior in another town.

D)

Public services are equivalent in every community.

24.

An implication of the Tiebout model is that comparable houses in a community with a relatively ________ level of taxes, given a level of public goods, will be worth _________.

A)

low; less

B)

high; less

C)

high; more

D)

low; nothing

25.

Which of the following is an implication of the Tiebout model?

A)

Local government should provide public goods characterized by a weak tax–benefit linkage.

B)

Local government should provide public goods characterized by a strong tax–benefit linkage.

C)

Local governments should provide public goods regardless of tax–benefit linkage.

D)

State or federal governments should provide public goods regardless of tax–benefit linkages.

26.

The Tiebout model implies that ________ should be financed at the local level, and ________ programs should be financed at the state and federal levels.

A)

garbage collection; education

B)

garbage collection; welfare

C)

road repair; education

D)

national defense; snow plows

27.

Which of the following is NOT a limitation of the Tiebout model?

A)

mobility; many people are not perfectly mobile

B)

competition; people may not have perfect information about the benefits and taxes where they live

C)

financing; lump-sum taxation is the most popular form of taxation

D)

spillover; the Tiebout model assumes that public goods have effects only in a given town, and no spillovers are observed in the neighboring towns

28.

Suppose the federal government promises to pay a state $0.50 for every $1 the state spends on health insurance for uninsured children. That transfer can best be characterized as:

A)

an interstate transfer.

B)

a block grant.

C)

a matching grant.

D)

a conditional block grant.

29.

Suppose the federal government pays $5 million into a state’s general fund. That transfer can best be characterized as which of the following?

A)

an interstate transfer

B)

a block grant

C)

a matching grant

D)

a conditional grant

30.

Suppose the federal government promises to pay a state $5 million to subsidize the loans of college students in that state. That transfer can best be characterized as:

A)

an interstate transfer.

B)

a block grant.

C)

a matching grant.

D)

a conditional block grant.

31.

The federal government gives a state a _________ grant, promising to pay the state $0.25 for every $1 the state spends on health care for senior citizens, which _______ the price of health care to the state by _________.

A)

block; increases; 25%

B)

conditional block; decreases; 25%

C)

matching; decreases; 75%

D)

partial matching; decreases; 25%

32.

Suppose the federal government wants a state to increase its spending on environmental cleanup from its current $4 million. The federal government _________ do this by offering a $3 million __________ grant.

A)

cannot; block

B)

can; block

C)

cannot; matching

D)

can; transfer

33.

A state is currently spending $40 million on highway improvements. If the federal government promises to pay the state $1 for every $1 spent by the state on highway improvements, it is offering a __________ grant that _________ increase total state spending on highway improvements.

A)

conditional; will

B)

conditional; will not

C)

matching; will

D)

matching; will not

34.

A state is spending $40 million on highway improvements. If the federal government promises to pay the state $0.25 for every $1 spent by the state on highway improvements, and if highway improvements are a normal good, the income effect induces the state to spend _________ on highway improvements; the substitution effect induces the state to spend _________ on highway improvements.

A)

less; less

B)

less; more

C)

no more or less (there is no income effect); more

D)

more; more

35.

A state is spending $30 million on disability programs in schools. If the federal government promises to give that state $25 million to spend on disability programs in its schools, the federal government is offering a _________ grant that _________ state spending on disability programs in schools.

A)

block; will increase

B)

block; may or may not increase

C)

conditional block; will increase

D)

conditional block; may or may not increase

36.

A city that is currently spending $1 million on policing receives a one-for-one matching grant of up to $2.5 million to spend on policing. Assume policing is a normal good, as are other programs paid for by the city. The income effect ___________; the substitution effect ___________.

A)

increases spending on non-policing programs; increases spending on policing

B)

increases spending on non-policing programs; decreases spending on policing

C)

increases spending on policing; does not affect spending on policing

D)

does not change spending on policing; increases spending on non-policing programs

37.

The federal government gives a state $300 million that it must spend on highway improvements. If the state was already spending $400 million, then from the state’s perspective, this ___________ grant is effectively ___________.

A)

conditional block; unconditional

B)

unconditional block; conditional

C)

matching; unconditional

D)

matching; conditional

38.

Which of the following always has an income effect?

A)

matching grants, but not block grants

B)

block grants, but not matching grants

C)

conditional block grants, but not block or matching grants

D)

block grants, matching grants, and conditional grants

39.

A city that is spending $1 million on policing receives a conditional grant of $500,000 to spend on policing. Assume policing is a normal good. The income effect ___________ spending on policing; the substitution effect ___________ spending on policing.

A)

increases; increases

B)

increases; decreases

C)

increases; does not affect

D)

decreases; increases

40.

A city is spending $1 million on policing and receives a one-for-one matching grant of up to $2.5 million to spend on policing. Assume policing is a normal good. The income effect ___________ spending on policing; the substitution effect ___________ spending on policing.

A)

increases; increases

B)

increases; decreases

C)

increases; does not affect

D)

decreases; increases

41.

Matching grants have ___________; block grants have ___________.

A)

both income and substitution effects; both income and substitution effects

B)

only substitution effects; only income effects

C)

both income and substitution effects; only income effects

D)

only income effects; only substitution effects

42.

Which of the following never has a substitution effect?

A)

matching grants

B)

block grants

C)

conditional block grants

D)

neither matching grants nor block grants have a substitution effect

43.

To the extent that federal block grants do not replace state spending but increase overall spending, there is:

A)

a flypaper effect.

B)

no income effect.

C)

no substitution effect.

D)

crowding out

44.

Excluding school finance equalization laws, which of the following is the primary reason educational spending can vary widely across towns?

A)

the difference in political influence of state legislators representing the towns

B)

the difference in the political influence of U.S. representatives

C)

the difference between the property values across towns

D)

the difference between local sales and gasoline taxes across towns

45.

If government believes that Tiebout sorting is optimal, which of the following is TRUE?

A)

School spending should be equalized across districts.

B)

School spending should not be equalized across districts.

C)

Local property taxes should not be linked to local education spending.

D)

Property taxes should be the same in each community.

46.

Which of the following is TRUE?

A)

Tiebout sorting in California was more effective prior to the passing of Proposition 13.

B)

Tiebout sorting in California was less effective prior to the passing of Proposition 13.

C)

Equalizing school spending across districts within a state leads to more Tiebout sorting.

D)

Tiebout sorting creates equal educational opportunity.

47.

Discuss the views of supporters and opponents regarding the No Child Left Behind (NCLB) legislation. What is the fundamental issue in the debate? How do these debates reshape the original legislation?

48.

Suppose that the U.S. Congress is debating whether to end the Temporary Assistance to Needy Families (TANF) program and instead let local governments replace this program with their own programs. Which approach would be more efficient? Explain.

49.

Suppose that a city mayor proposes to pay for the acquisition and construction of public parks by implementing a 7-year local sales tax. Someone argues that the financing mechanism should instead be something that is spread out over more time, noting that a person who moves here 8 years from now would get to enjoy the parks but under the current proposal wouldn’t pay for them. Similarly, this individual argues that those who live in the community now pay for it, but if they move, they won’t benefit at all from it after a few years. The mayor argues that those who move out of this area will in fact benefit from the parks beyond their personal use and that those who move to this area after the 7-year period will implicitly pay for the access to the parks. What does the mayor mean?

50.

Discuss the difference between federal matching grants and block grants, and describe how they each affect overall state spending in terms of both the income effect and substitution effect. If the federal government gives one state a matching grant of $4 million and another state a conditional block grant of $4 million and requires that both be used only for policing costs, which state is likely to increase its spending on policing more, and why?

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