Chapter 15, Problem 1RQ

To determine

Major component of government outlays, sources of revenue and difference in composition of state and local government outlays and revenue with that of Federal government.

Explanation of Solution

Government outlays done for the Federal, state and local governments make up a significant portion of the economic activity in the US. The types of spending and the sources of their funds can differ significantly, however.

The major components of government outlays are:

• Government purchases of goods and services.
• Transfer payments (e.g., social security)
• Net interest payments on debt. Comment

The sources of government revenue are

• Personal taxes
• Contributions to social insurance.
• Taxes on production and imports.
• Corporate taxes.

Spending and sources of funds for the federal government are:

• About 30 percent of spending on goods and services.
• Spending weighted more for transfer payments.
• Spends to help fund education, transportation and welfare.
• Net interest payments a significant proportion of federal spending.
• Federal government receives 80 percent of its revenue from personal taxes and less than 10 percent from corporate taxes.

Spending and sources of funds for state and local governments are:

• About 75 percent for spending on goods and services.
• Spending less heavily weighted for transfer payments.
• Net interest paid is small.
• About one-third of revenue comes from personal taxes.

Economics Concept Introduction

Introduction:

Government outlays are the expenditure done by a government for betterment of economy. Government revenue is the income earned by imposition of taxes, aids etc.