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ch13notes - Government and the Macroeconomy U.S Government...

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Government and the Macroeconomy U.S. Government expenditures are roughly 20% of GDP U.S. Government revenues are slightly more than 17% of GDP The U.S. Government deficit was 2.6% of GDP in fiscal 2005 Government may finance deficits by: Selling assets (parks, buildings, holdings of gold) Printing money Borrowing Government expenditures ≠ Government purchases (NIPA) Government purchases exclude transfers and interest Government purchases (including state and local) ≈ 19% of GDP All U.S. governments’ expenditures ≈ 37% of GDP
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2005 U.S. Federal Government Budget
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U.S. Federal Government Spending over Time The size of the U.S. federal budget has grown dramatically Prior to WW II, expenditures were less than 10% of GDP Expenditures soared during the war Spending has averaged about 20% of GDP since WW II Expenditures exceeded revenues from 1975 – 1995 Expenditures have fallen more recently Taxes have fallen more than expenditures Since the 70’s, most years the federal budget has been in deficit Deficits accumulate into debt
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The Government Budget Constraint Nominal Uses of Funds Government purchases of goods and services: t t G P
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