Question

Suppose the U.S. House of Representatives is debating a bill to fund construction and maintenance for the nation's highway system. Representative Sandy Shady adds a provision to the bill that would fund a new public art museum in her district. The authorization of expenditure for the museum would be an example of:_________
a. an earmark.
b. an unfunded liability.
c. a collective action problem.
d. a principal-agent problem.

Answer 1

Answer: The authorization of funds for the museum is an example of an earmark.

Explanation:

Earmarking is the act of setting aside particular fund for a specific purpose.

In the United States, earmarks are directive from the Congress that funds should be allocated and spent on certain projects.

For example, one can say the prime minister has earmarked three billion dollars for the construction of new hospitals. The expenditure on the funding of the public art museum is an earmark.