Chapter 30: Q.44 (page 743)
How will cuts in state budget spending affect federal expansionary policy?
Cuts in state budget spending will partially offset the increase in federal spending.
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Debt has a certain self-reinforcing quality to it. There is one category of government spending that automatically increases along with the federal debt. What is it?
Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
Suppose that gifts were taxed at a rate of for amounts up to and for anything over that amount.
Would this tax be regressive or progressive?
Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy is producing more than potential GDP.
True or False:
a. Federal spending has grown substantially in recent decades.
b. By world standards, the U.S. government controls a relatively large share of the U.S. economy.
c. A majority of the federal government's revenue Is collected through personal income taxes.
d. Education spending is slightly larger at the federal level than at the state and local level.
e. State and local government spending has not risen much in recent decades.
f. Defense spending is higher now than ever.
g. The share of the economy going to federal taxes has increased substantially over time.
h. Foreign aid is a large portion, although less than half, of federal spending.
i. Federal deficits have been very large for the last two decades.
j. The accumulated federal debt as a share of GDP is near an all-time high.
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