Table L: Effect of W and W/S on Health Care

question 49

Multiple Choice

Table l: Effect of W and W/S on Health Care
Dependent variable: Government spending on health care as share of GDP.


$\begin{array}{l|ll}\hline \text { Independent variables } & \text { Model } 1 & \text { Model } 2 \\\hline \text { Winning coalition } & 4.09^{*}(0.61) & \\\text { Selectorate } & -0.35(0.51) & \\W / S & & 3.95^{*}(0.49) \\\text { Constant } & 3.04^{*}(0.32) & 2.80^{*}(0.33) \\N & 1204 & 1204 \\R^{2} & 0.22 & 0.22 \\\hline\end{array}$ GDP = gross domestic product.
-Consider the results from Model 2 in Table 1, above. Does an increase in W/S significantly increase, decrease, or have no effect on the government spending on health care (measured as the share of GDP) ?

• A) It significantly increases spending on health care.
• B) It significantly decreases spending on health care.
• C) It has no effect on health care spending.

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Definitions:

Risk-averse Investors

Individuals who prefer lower returns with known risks rather than higher returns with unknown risks.

Optimal Risky Portfolio

An investor’s best combination of risky assets; the combination that maximizes the Sharpe ratio.

Expected Utility

A theory in economics that calculates the utility expected from an investment or action, considering all possible outcomes weighted by their likelihood.

Less Risk-averse Investors

Individuals who are willing to take on greater levels of investment risk in pursuit of higher returns.