Question

Public choice theory concludes that most government departments as well as other non-profits tend to waste money because:

most government budget managers support the Keynesian philosophy that more spending leads to more economic stimulus.

government budget managers do what they can to spend everything in their budget, so that their budget for the following year is not cut.

most governments run budget surpluses and politicians encourage department managers to spend the surplus.

most budget managers' salaries are connected to the size of their budgets.

most government workers, as well as most workers in the corporate sector, commit fraud and mishandle their budgets.

Answer 1

most government budget managers support the Keynesian philosophy that more spending leads to more economic stimulus.

Keynesian economists believe that a fiscal stimulus is created when a government spends more than it receives in taxes and other revenue sources; this is called “deficit spending”.As government spending increases through a fiscal stimulus, the stimulus will provide more income to private individuals who will therefore spend more through consumption. This increased spending, this increased demand, will encourage private companies to begin spending more for output to meet the higher demand.