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Chapter 30: Q.27 (page 742)

What has been the general pattern of U.S. budget deficits in recent decades?

Short Answer

Expert verified

Except for the years 1998 and 2001, the United States has consistently had budget deficit.

Step by step solution

01

Step 1. Concept of budget deficit

When the expenditure incurred by government is more than the tax revenue collection, then there is said to be a budget deficit.

02

Step 2. Explanation

If the general trend of the US deficit is seen, it may be concluded that the US economy has always been in a deficit situation. Only three years from the 1970s era, as well as the latter decade of the 1990s, did the economy have a surplus; otherwise, the economy was in deficit. The big deficit occurred during a period when the US economy was hit by recession in previous years.

As a result, it may be claimed that the US economy has been confronting increasing fiscal deficits in recent decades.

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Most popular questions from this chapter

What is the difference between expansionary fiscal policy and contractionary fiscal policy?

How would a balanced budget amendment affect a decision by Congress to grant a tax cut during a recession?

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.

Give some examples of changes in federal spending and taxes by the government that would be fiscal policy and some that would not.

How will cuts in state budget spending affect federal expansionary policy?
See all solutions

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