(a)
To explain:
The major categories of US government spending that shrunk since 1960s.
Answer to Problem 1QFR
Since the decade of 1960s, among the four major areas of the US government spending, spending volume on two areas has been shrinking while the other two areas are growing fast.
Explanation of Solution
Looking at the federal government spending trends, it is found that since 1960s the government expenditure on the areas of social security and healthcare has been grown a lot. During the same period governmentexpenditure volume on the rest major areas which are national defense and interest payments has shrunk relatively.
Government spending:
The major areas of the US government spending are mainly national defense, social security, health care and payment of interest. Since 1960s, GDP share has been increasing continuously on the spending of these areas.
(b)
To explain:
The flexibility of US budget as a result of growth in the mandatory programs.
Answer to Problem 1QFR
There are some mandatory areas in US government budget in which government expenditure volume has been increased day by day. Due to the fast growth of these mandatory programs the US budget has become flexible gradually.
Explanation of Solution
Since the beginning of the 21st century,the baby boom generation has begun to cross 65 years, and in the coming decades the greatest volume of American citizens will be the people over 65 years. Then the running payroll tax volume of US government will be insufficient to provide social security as well as health care programs to these people and consequently budget deficits will reach far extent. This reason makes the US budget compelled to be more flexible. Nowadays, 50% share of GDP alone is spent on the mandatory programs which was 30% before. For this increment expenditure on national defense and interest payment must be decreased to an extent by the govt. Here, conclusion is that the result of rapid growth of mandatory programs is more flexiblein the US budget.
Mandatory programs:
The mandatory programs of the US government budget known as entitlement spending too, are the government expenditure volume spent on some certain fields which are declared as mandated by the law. These mandatory fields include social welfare programs such as social security; Medicare facilities; temporary assistance for needy families and insurance for
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Chapter 28 Solutions
Principles of Economics (Second Edition)
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