1 © ©1999 South-Western College Publishing PowerPoint Slides prepared by Ken Long Principles of Economics 2nd edition by Fred M Gottheil

2 Chapter 29 Government Spending 12/9/2015 © ©1999 South-Western College Publishing

3 This chapter discusses principles associated with © ©1999 South-Western College Publishing Transfer Payments Merit GoodsPublic Goods

4 What comprises government spending? Public goods Merit goods Transfer payments © ©1999 South-Western College Publishing National defense Veterans’ benefits Space exploration Interest payments

5 What is a Public Good? A good whose benefits are not diminished even when additional people consume it and whose benefits cannot be withheld from anyone © ©1999 South-Western College Publishing

6 What are examples of a Public Good? roads public education national defense street lights © ©1999 South-Western College Publishing

7 What is a Merit Good? A good that market demand and supply do not produce enough of, in some people’s opinion © ©1999 South-Western College Publishing

8 What are examples of a Merit Good? higher education artistic endeavors health related goods public libraries national public radio © ©1999 South-Western College Publishing

9 What is a Transfer Payment? Government spending that transfers income from one person to another © ©1999 South-Western College Publishing

10 What are examples of Transfer Payments? welfare food stamps social security unemployment benefits © ©1999 South-Western College Publishing Medicare Medicaid

11 What is Welfare? Government provided assistance to the poor, the elderly, and the disabled © ©1999 South-Western College Publishing

12 What is the Food Stamp Program? An aid program that provides low-income people with stamps that can be redeemed for food and related items © ©1999 South-Western College Publishing

13 What is Medicaid? A health care program administered through Social Security that is applicable to low-income and disabled people © ©1999 South-Western College Publishing

14 What is Social Security? A social insurance program that provides benefits subject to eligibility, to the elderly, disabled, and their dependents © ©1999 South-Western College Publishing

15 What is Unemployment Insurance? A program of income support for eligible workers who are temporarily unemployed © ©1999 South-Western College Publishing

16 What is Medicare? A health care program administered through Social Security that is applicable to everyone over a certain age © ©1999 South-Western College Publishing

17 How much does the government spend on interest payments? In 1996, the total debt was $5.3 billion, and $277.1 billion was spent on interest to the national debt © ©1999 South-Western College Publishing

18 How much does the government spend? In 1996, state and federal governments spent $2,636.1 billion © ©1999 South-Western College Publishing

19 What is the percentage makeup of state and federal spending? 64.4% federal 35.6% state © ©1999 South-Western College Publishing

20 What percent of GDP does government spend? The federal government is responsible for about 25% of GDP, federal, and state governments; combined it’s about 33% © ©1999 South-Western College Publishing

21 21 © ©1999 South-Western College Publishing

22 What comprises government spending? What is a Public Good? What is a Merit Good? What is a Transfer Payment? What is Welfare? What is Medicaid? What is Social Security? What is Medicare? What percent of GDP does the government spend?What percent of GDP does the government spend?

23 ENDEND © ©1999 South-Western College Publishing