The size of the government is a concern to various ideologic

The size of the government is a concern to various ideological views. Identify the issu present and measure the size of government. Complete the following analysis e on how best to Expenditure 2001 321.2 172.2 217.4 269.8 433.0 206.2 243.1 1862.8 1997 285.7 123.8 190.0 2007 579.8 2011 751.3 372.5 485.7 597.4 730.8 230.0 435.5 3603.1 Defense Health Medicare Income Security Social Security Net Interest other Total 266.4 375.4 366.0 586.2 237.1 317.9 2728.7 2350 365.3 244.0 157.3 1601.1 GDP GDP 1997 8.3324 trill 84.628 GDP 2001 10,2862 trill 90.727 GDP 2011 15.094 trill 113.338 GDP 2007 14.028 trill GDP Deflator 106.231 Population 272.958 mill 285.225 mill 301.696 mill 312.040 mill Calculate the absolute change in federal expenditures for years 2007-2011. Explain the significance or benefit of this information. a. B Calculate the change in federal expenditures in Real (inflation adjusted 2011 dollars) terms, explain the significance C. Calculate the change in real Govt. expenditures per capita and explain D Calculate the change in total expenditure per GDP, expenditure as percentage of GDP and note the difference between 2007 and 2011

Solution

a) In 2011, the federal expenditure was 3603.1 which was increased from its level of 2728.7 in 2007. The absolute change is = (3603.1 - 2728.7) = 874.4. This increase in the federal expenditure is of great significance as government spending on goods and services are considered to be a major factor behind the composition of aggregate expenditure. Increase in federal spending help the recessionary trends to fade away by stimulating aggregate demand.

b)  Divide the spening by GDP deflator. In 2011, the federal expenditure in real terms was 3603.1*100/113.338 = 3179 which was increased from its level of 2728.7*100/106.231 = 2569 in 2007. The change is 610

c) Real federal expenditure per capita in 2007 was =2569/0.301696 = $8515.2 which increased to 3179/0.312040 = 10187.8 in 2011. These figures are computed by dividing the answers from part b) with population (which is changed to billion). We see that 2007 to 2011 was a period during which the economy was suffering from recession and its aftermath. Government followed the policy of expansion and provided relief due to which expenditure per person increases

d) Total expenditure as a % of GDP in 2007 was 2728.7*100/14028 = 19.45%. This increased to 3603.1*100/15094 = 23.87% in 2011. Total expenditure as a % of GDP increased by almost 4.5 percent during this period.