Answer to Question #270170 in Macroeconomics for Audrey

Question

1.20 Although government intervention in an economy is sometimes justified, governments may still fail when they intervene. Government failure occurs because: (2) (1) Politicians often make decisions that win votes in the short term rather than making decisions that maximise long term economic prosperity; (2) Government organisations are largely bureaucratic and, as such are not subject to competition or under pressure to maximise profits; (3) Both statements (1) and (2) are correct; (4) Neither statement a nor b is correct.

Answer 1

(1) Politicians often make decisions that win votes in the short term rather than making decisions that maximise long term economic prosperity;