Chapter 2 Outline |
II. HOW BIG IS GOVERNMENT? |
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. |