1. Ch. 10 Econ 1. Total gov’t expenditures at all levels was almost $3 trillion in 2003- about $__________ for every American.

2. Sec 1 2. Government spending did not begin to increase until the _____s for three reasons. 1) high costs of _____ 2) the _______________ changed public opinion about gov’t assisting in everyday economic affairs 3) the success of large-scale ___________ projects

3. Sec 1 3. Government spending is for the purchase of ________ and _________ and payments to _____________ Americans. 4. Goods & services that the gov’t buys includes everything from _____ for the nation’s defense to ____________ for its employees.

4. Sec 1 5. Transfer payments include Social Security, ______, & ____________ compensation. Two kinds of transfer payments exist. If the payment is made from one level of gov’t to another – its called a ____________. ________ are payments made to individuals or entire industries to encourage or protect a certain economic activity.

5. Sec 1 6. Gov’t spending affects resource allocation because purchase decisions, subsidies, and transfer payments either stimulate economic activity or affect the __________________. 7. Government spending creates ______________ with the private sector.

6. Sec 2 1. The federal budget consists of (1) mandatory spending, which includes _________________ on borrowed money, ______________, and _______ (2/3 of the budget); (2) ____________ spending, which includes programs that Congress must approve annually (1/3 of the budget).

7. Sec 2 2. The government’s fiscal year is from __________ to ____________. 3. The _________ confers with his advisors and drafts a budget which he submits to Congress. 4. The 2 nd step is ______ action – Congress has the power to approve, modify, or disapprove the president’s proposed budget.

8. Sec 2 5. The House sets budget targets for each category of the discretionary budget. The bill must be approved in the subcommittee, it is sent to the full House of Appropriations Committee. If approved, it goes to the entire House for a vote. 6. The third step is ________ action.

9. Sec 2 7. The last step is final approval – the House & Senate send the bill to the _________ for his approval or veto. Once signed, it becomes the official budget. 8. _____________ spending categories include: Social Security; income security; __________; ________ on the federal debt; health programs; & __________ benefits.

10. Sec 2 9. ___________ spending categories include; _________, employment, social services, transportation, natural resources, and the _______________.

11. Sec 3 1. Most states approve their budgets using a process similar to the federal government’s. 2. Some states have a ______________ budget amendment that requires annual spending not exceed revenues. 3. Local gov’t empower representatives – the mayor, city council, or county judge to approve the budget.

12. Sec 3 4. _______ of state spending is directed toward intergovernmental expenditures, public welfare, insurance trust funds, ________ education, _________, hospitals, and interest on the public debt. The other 20% is spent on a variety of expenses.

13. Sec 3 5. Local governments include _________, municipalities, ________, & _______ districts. 6. The largest categories of spending (____ of the total) include; elementary and secondary education; ______utilities; hospitals; ______; _______ on debt; public welfare; and highways. The other third includes housing and community development, _____protection, and _____ and recreation.

14. Sec 4 1. Throughout US history, the federal gov’t has practiced _______ spending. In ____ the federal budget had its first surplus in 29 years. 2. Historically, the largest federal deficits happened during _____. The budget had a _____ by 1947, which lasted until the _______s.

15. Sec 4 3. When ________ became president, his administration increased _______ spending and cut taxes. It was not until after the Omnibus Budget Reconciliation Act of 1993 that the deficit began to shrink. 4. The federal debt is the total amount the gov’t has borrowed from _______ to finance its deficit _______.

16. Sec 4 5. The total federal debt had grown to $____ trillion by 2003. About $1.9 trillion is trust fund money the gov’t owes itself. 6. The federal debt causes a transfer of purchasing power from the private to the public sector. The larger the federal debt, the larger the ________ payments, and the more ______the gov’t must pay.

17. Sec 4 7. If ______ are increased to make the federal debt’s interest payments, it may diminish ________ for Americans to work, save, and invest. 8. In 1991, Congress tried to mandate a balanced budget with the Gramm- Rudman-Hollings Act.

18. Sec 4 9. In 1999 Congress increased _______ spending and cut _____; this resulted in cutting popular programs such as health, _______, and veterans programs. 10. Due to the 2001 recession, Sept. ____, & the war on _______, the gov’t faces record budget _______.