Public Choice Analysis Explains That

question 28

Multiple Choice

Public choice analysis explains that

• A) politicians have strong incentives to favor deficit finance over tax finance.
• B) policy makers believe the budget should be balanced except in times of war.
• C) the legislator who is a spending "watch dog" can save her constituents a substantial amount of tax money.
• D) given the way Congress operates, the apparent popularity of deficit financing is surprising.

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Definitions:

Dominant Strategy

Rephrased: In strategic decision-making, a Dominant Strategy is the optimal choice for a participant that yields the best outcome, independent of the strategies chosen by other players.

Nash Equilibrium

A principle in game theory where each participant's tactic is the best given the tactics of others, and none of the players stand to benefit from altering merely their strategy.

Credible Threat

A declaration or action by a party that it will follow through with a particular response if certain conditions are met, believed to be feasible by the other party.

Warranty

A guarantee, typically made by a manufacturer or seller, to repair or replace a product within a specified period if it is found to be faulty.