5.6 Exercises

1. How has the composition of federal, state, and local government spending changed over the past 40 years? What social and economic factors might have contributed to this change in how governments spend their funds?
2. In class, we have looked at four problems that can arise from the federal budget deficit: (1) Lower long-term economic growth, (2) payments to foreign investors, (3) reduced ability to respond to important issues, and (4) debt monetization. Explain each of those four issues in two sentences.
3. Explain the difference means-tested'' andnon-means tested’’ with regard to mandatory spending such as Medicaid and Medicare.
4. What are the various components of a budget?
5. Describe the advantages and disadvantages associated with a (1) line item budget, (2) performance budget, and (3) program budget.