Chapter 2 Outline
A. Employment and Goods and Services
1. In 1992, government employed nearly one out of every five people whoworked in the U.S. economy.
2. In 1992, government purchased a little over 10 percent of the durables andnondurables produced by the U.S. economy.
3. In 1992, government purchased about 6 percent of the services produced bythe economy.
4. In 1992, government purchased 58 percent of the structures produced by theeconomy.
B. Transfer Payments
1. In 1992, government transfer payments provided 18.6 percent of total aftel-taxincome.
C. Costs of Government
1. Government revenues are an indicator of the opportunity cost of government.
2. In 1992, government revenue was nearly 38 percent of total income.
3. Indirect costs of government are associated with taxation and regulation.
a. Taxation can impose indirect costs because it induces people to change their economic behavior.
1. This cost has been estimated to be from 13 to 24 percent of the taxrevenue raised.
b. Business firms and consumers incur costs when they comply with government regulation.
1. This cost has been estimated to be from $250 to $542 billion.
c. Like taxation, regulation can also induce people to change their economic behavior.
d. There is an indirect cost associated with government borrowing.
1. This cost arises because increased government borrowing may cause an increase in interest rates.
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