Professional Documents
Culture Documents
We will walk through an example of a practice question and solution that could apply to this module.
Read the question first and try to answer yourself and then review the solution.
Consequences of a guardian perspective entail the following: this view downplays or ignores non-
financial social benefits and costs. This view interprets the meaning of costs idiosyncratically.
Resources owned by government tend to be viewed as free goods. This view ignores costs not borne
by its own level of government. It also treats subsidies from other levels of governments as benefits.
And finally, this view wants to use a high social discount rate.
Consequences of a spender perspective entail the following: Expenditures on constituents are viewed
as “benefits” rather than costs. Transfers received by constituents are viewed as benefits. Some
costs are viewed as benefits, this often means support for any project rather than a “do nothing”
status quo. Utilized resources that are owned by government are viewed as having no cost. Large,
capital-intensive projects with big sunk costs are favoured. This view also tends to view market
allocations as inappropriate, and does not accept that project resources are diverted from other
productive uses. And finally, this view favors a low discount rate.