Chapter 14 Government Spending, Revenue, and Public...

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 14.11

CHAPTER 14

Government Spending,

Revenue, and Public Choice

14.1 Public Goods and Taxation

14.2 Federal, State, and Local Budgets

14.3 Economics of Public Choice


CHAPTER 14

Government Spending,

Revenue, and Public Choice How does the demand for public goods differ from the

demand for private goods?

How are responsibilities divided among levels of

government?

How big is the federal budget, and where does the

money go?

Why do politicians need to deal with special interest

groups?

Why do most people remain largely ignorant about

what’s happening in the public sector?

Consider


LESSON 14.1

Public Goods and Taxation

Calculate the optimal quantity of a

public good.

Distinguish between the two principles

of taxation.

Identify other government revenue

sources besides taxes.

Objectives


LESSON 14.1

Public Goods and Taxation

benefits-received tax principle

ability-to-pay tax principle

tax incidence

proportional taxation

progressive taxation

regressive taxation

marginal tax rate

Key Terms


Public Goods

The demand for public goods

Optimal quantity of the public good


Market Demand

for a Public Good


Tax Principles

Benefits-received taxation

Ability-to-pay tax principle


Other Revenue Issues

Tax incidence

Marginal tax rate

Pollution taxes and sin taxes

User fees

Borrowing


LESSON 14.2

Federal, State,

and Local Budgets

Identify the top spending category in the federal

budget and the top source of revenue.

Identify the top spending category in state budgets

and the top source of revenue.

Identify the top spending category in local budgets

and the top source of income.

Compare the relative size of the U.S. government

during the last decade with other major economies.

Objectives


LESSON 14.2

Federal, State,

and Local Budgets

government budget

payroll taxes

Key Terms


Federal Budgets

A government budget is a plan for

outlays and revenue for a specified

period.


Federal Spending

Redistribution

Defense

Interest payments

Other outlays


Federal Spending

by Category


Federal Revenue

Sixteenth Amendment to the U.S.

Constitution empowered Congress to

levy a tax on personal income.

Federal Insurance Contributions Act

(FICA)

Social Security and Medicare

Payroll taxes


State Budgets

State spending

State revenue


Local Budgets

Local spending

Local revenue


Composition of State Spending and State Revenue

Composition of Local Spending and Local Revenue


Government Outlays

as Percentage of GDP


LESSON 14.3

Economics of Public Choice

Discuss how representative democracy

may favor special interests at the

expense of the public interest.

Distinguish between bureaus and firms,

and explain why bureaus might be less

responsive to customers than firms are.

Objectives


LESSON 14.3

Economics of Public Choice

maximizing political support

rational ignorance

bureaus

Key Terms


Representative Democracy

Maximizing political support

Role of special interest

Rational ignorance


Bureaus Versus Firms

Voluntary exchange versus coercion

Product prices

Customer feedback

Voter incentives

Private versus public production

Chapter 14 Government Spending, Revenue, and Public...

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