Ch. 15: Homework

You have been hired as an economic advisor for a politician running for national office. At a recent campaign event, the politician said that corporations are paying too much in taxes and are funding most of the federal government's operations. When you speak to the politician after the event, what would you say?

"We have a great deal of work to do. On the news tonight, I predict there will be an expert correcting you and questioning why anyone would vote for you. Individuals, through income tax and social insurance taxes, provide the bulk of the federal government's revenue."

What changes have been made to the Social Security program since its creation in 1935?

- Social Security taxes as a percentage of income have increased over time. - The number of workers per retiree has decreased. - The length of time that individuals collect Social Security benefits has gotten longer.

Of the following types of government spending, which are discretionary and which are mandatory components of a government budget? 1. A new interstate highway: 2. Medicare: 3. International aid:

1. discretionary 2. mandatory 3. discretionary

According to the article, Desmond Lachman, a former International Monetary Fund director, believes that Brazil is on course to have its percentage of gross debt-to-GDP become greater than

80 percent

The government announced that last year it spent $495 million in mandatory outlays and $416 million in discretionary outlays. It received $811 million in revenue.Last year, the government had a budget deficit of $ 100 million.

811-416-495= 100million

The budget of the federal government is dramatically different than it was 50 years ago. In what way is it different?

Mandatory spending has increased as the population has gotten older and the Social Security and Medicare programs have expanded.

In periods of recession, income tax revenues

decrease

These fluctuations in income tax revenues are one reason why

deficits usually shrink in expansions. deficits tend to rise in recessions.

In periods of economic expansion, income tax revenues

increase

Which category is the largest percentage of the U.S. government budget?

mandatory spending

Which of the following policies would dramatically and permanently reduce government outlays?

reducing the cost-of-living increase for Social Security recipients reducing the number of people eligible for Medicare and Medicaid by half