Transcript The Economics of Government Spending

Economics 10-1
The Economics of
Government
Spending
Pages 255-258
The Economics of
Government Spending
Pages 255-258
ESSENTIAL QUESTION:
• What is the impact of government
spending on the U.S. economy?
•What are the kinds of government
spending?
•What factors affect the government’s
spending decisions?
The Economics of
Government Spending
Pages 255-258
GPS STANDARDS:
SSEMA3- Explain how the government uses fiscal
policy to promote…. [price stability, full employment,
economic growth & social goals]
b.) Explain the government’s…spending decisions
Economics 10-1
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The Economics of Government Spending
Pages 255-258
• The role of the federal government has
grown, making it a vital player in the economy.
•Government is now big business in America.
• In fact, all levels of government in the United
States spend more than all privately owned
businesses combined.
•Government is a major player in our economy
due to its enormous expenditures.
Economics 10-1
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The Economics of Government Spending
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•
Between 1962 and 1993, federal transfer
payments to people eligible for benefits
because of poverty rose from under 1 percent
of the nation’s Gross Domestic Product (GDP)
to just about 2.5 percent.
•In contrast, at the height of World War II (the
early 1940s), federal spending on defense was
40 percent of GDP.
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The Economics of Government Spending
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• In 2001 the total government expenditures at
all levels amounted to about 30 percent of
GDP.
•Total government expenditures at all levels
was almost $3 trillion in 2003—about $10,300
for every American.
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The Economics of Government Spending
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• Government spending did not begin to
increase until the 1940s for three reasons:
1. the high costs of World War II;
2. the Great Depression changed public
opinion about the government assisting
in everyday economic affairs and in
improving Americans’ economic welfare
3. and the success of large-scale public
works projects.
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The Economics of Government Spending
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• Debate continues over the role government
should play in the economy.
•Government promotes the broad social and
economic goals of Americans, but the benefits
of a government policy should outweigh its
costs.
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The Economics of Government Spending
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• Government spending is for the purchase of
goods and services and payments to
disadvantaged Americans.
•Goods and services that the government buys
includes everything from tanks for the nation’s
defense to paper and soap for its employees.
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The Economics of Government Spending
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• Transfer payments include:
1. Social Security
2. welfare
3. unemployment compensation
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The Economics of Government Spending
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• Two kinds of transfer payments exist:
1. If the payment is made from one level
of government to another, it is called a
grant-in-aid
2. Subsidies are payments made to
individuals or entire industries to
encourage or protect a certain
economic activity.
Economics 10-1
The Economics of
Government
Spending
Pages 255-258
Economics 10-1
FREE CHOICE
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Pages 255-258
p. 255-258