CHAPTER 12
FEDERAL BUDGETS AND PUBLIC POLICY
SOLUTIONS TO END OF CHAPTER PROBLEMS
1. National defense accounted for about half of all federal outlays in 1960. That share declined
2. Certain expenditure items are not under congressional control; they are set by existing laws.
Entitlement programs provide benefits for anyone meeting the eligibility guidelines. Budgeted
expenditures must therefore estimate the number of households who will receive benefits,
which depends in part on the state of the economy. During a recession, for example,
3. An annually balanced budget has government revenues matching government spending in
each year. This requires the government to decrease spending during recessions when tax
revenues drop and increase spending in expansions when tax revenues rise. This would
4. The federal budget has been in deficit for all but 14 years since 1929 when the Great
Depression began. The most obvious reason why federal deficits have persisted is that,
5. The recession of 2009–2010 and policy responses to it have rocketed the federal deficit
6. The federal or national debt is a stock variable measuring the net accumulation of past
deficits, the amount owed by the federal government. Most recently the U.S. federal debt
7. In talking about the national debt, we should distinguish between the gross debt and debt
held by the public. The gross debt includes U.S. Treasury securities purchased by various
8.
b. i. The new debt is $2.6 trillion.
9. The long-term effects of deficit spending depend on how the government spends the borrowed
dollars. If additional outlays are used for investment, the public investment may be as
10. The Great Recession and policy responses to it have rocketed the federal deficit above $1
trillion and sharply increased the national debt to a level that is not sustainable. Federal
