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Each year, the government borrows funds from U.S. citizens and foreigners to cover its budget deficits. It does this by selling securities (Treasury bonds, notes, and bills)—in essence borrowing from the public and promising to repay with interest in the future. From 1961 to 1997, the U.S. government has run budget deficits, and thus borrowed funds, in almost every year. It had budget surpluses from 1998 to 2001, and then returned to deficits.

The interest payments on past federal government borrowing were typically 1–2% of GDP in the 1960s and 1970s but then climbed above 3% of GDP in the 1980s and stayed there until the late 1990s. The government was able to repay some of its past borrowing by running surpluses from 1998 to 2001 and, with help from low interest rates, the interest payments on past federal government borrowing had fallen back to 1.4% of GDP by 2012.

We investigate the patterns of government borrowing and debt in more detail later in this chapter, but first we need to clarify the difference between the deficit and the debt. The deficit is not the debt . The difference between the deficit and the debt lies in the time frame. The government deficit (or surplus) refers to what happens with the federal government budget each year. The government debt is accumulated over time; it is the sum of all past deficits and surpluses. If you borrow $10,000 per year for each of the four years of college, you might say that your annual deficit was $10,000, but your accumulated debt over the four years is $40,000.

These four categories—national defense, Social Security, healthcare, and interest payments—account for roughly 73% of all federal spending, as [link] shows. The remaining 27% wedge of the pie chart covers all other categories of federal government spending: international affairs; science and technology; natural resources and the environment; transportation; housing; education; income support for the poor; community and regional development; law enforcement and the judicial system; and the administrative costs of running the government.

Slices of federal spending, 2014

The pie chart shows that healthcare (including Medicaid) makes up roughly 26% of federal spending; Social Security makes up 24%; national defense makes up 17%; net interest makes up over 6%; and all other spending makes up over 25%.
About 73% of government spending goes to four major areas: national defense, Social Security, healthcare, and interest payments on past borrowing. This leaves about 29% of federal spending for all other functions of the U.S. government. (Source: https://www.whitehouse.gov/omb/budget/Historicals/)

State and local government spending

Although federal government spending often gets most of the media attention, state and local government spending is also substantial—at about $3.1 trillion in 2014. [link] shows that state and local government spending has increased during the last four decades from around 8% to around 14% today. The single biggest item is education, which accounts for about one-third of the total. The rest covers programs like highways, libraries, hospitals and healthcare, parks, and police and fire protection. Unlike the federal government, all states (except Vermont) have balanced budget laws, which means any gaps between revenues and spending must be closed by higher taxes, lower spending, drawing down their previous savings, or some combination of all of these.

Questions & Answers

What is deadweight loss?
DAVID Reply
what is economics
Michael Reply
economics is. study about money and the human beings,the economics is social science
Leela
Economics is a science which studies humans behaviour between ends and scarce means.
Caasianebok
the total amount of money earned within a country
abdul Reply
right
Ashish
What is trade line
Ruchi Reply
what is scars
Siaw Reply
What is land as labour
Siaw
Price and output determination in a monopoly?
Ruchi Reply
Monopoly :its features, measures market power
Ruchi
Monopoly is market structure where he/she is d boss with no competition.Therefore he quote his own price for product as well for quantity he provide. Eg.Suppose desert area only one shop he/she selling 10ltr water bottle @25.But with same amt you could have bought 20ltr if it's perfect competition.
Tactful
Economics is a social sciences that have diverse application
Francis Reply
what is economics?
Osborne Reply
Economic is the study of human behaviour in relation with the scare resources and it alternate use.
Tactful
Economics is a social sciences that have diverse application...
Francis
the branch of knowledge concerned with the production, consumption, and transfer of wealth.
charlon
choice and opportunity cost?
SRIPRIYA Reply
choice is the next best alternative
Taina
Choice is option available. Opportunity cost means giving up other to get The 1st one. eg. U r hungry u got 2option available on fridge A and B. You select A over B. so this is opportunity cost. B is the Opportunity Cost over A.
Tactful
can I get simple language and examples?
Gajendra Reply
what is demand
Yavara Reply
what is fiscal policy
David
fiscal policy can be defined as the use of government's income and expenditure for a specific purpose
Nzenwata
ahhhh.. i dont what is expindetures
ian
It is the policy use by govt to influence economy ( manage inflation and deflation). Steps involved are govt spending and taxation.
Tactful
Demand is quantity of good a person is willing and ready to buy at given period of time at given price.
Tactful
good
abubakar
good but high language
Gajendra
lower the language @gajendra Singh
abubakar
What is natural monopoly
Ruchi
Natural monopoly is a market structure or system where the creation of goods and services, it's distribution and pricing mechanisms are undertaken by a sole firm resulting from demand, economies of scale and existing market survey other than legal constraints.
Gh
I don't really know anything about economics but am offering it at the University....
Oteng
Which uni if I may ask...?
Gh
can u help me guys to answer this question what are the different ways of defining money in your economy? Compare these with the monetary aggregates commonly used in another selected country. Explain their differences and the reasons for such differentiation.
aisyah
Why do we observe a wide variety of checking and savings accounts, rather than just one of each type? What are the reasons for the existence of financial intermediaries? Why do the ultimate lenders usually not lend directly to the ultimate borrowers?
aisyah
what is economic
David
The social science which study human behaviour and relationship between end and scare mean which have alternative uses.
Amadu
Trade line example
Ruchi
@ruchi y have conpleted pg in economics or doing pg in econonics
Ashish
What is demand supply
Yahuza
Demand and supply or demand supply?
BADAB
Demand refers to the quantity of a commodity that buyers are willing and able to buy at particular price over a given period of time.
BADAB
Lizzy had Rs 500, John has Rs 50, Fifi will have Rs 700, who has more money? Plz solve this question
Ruchi
@Ruchi john has more money
Ashish
How?
Ruchi
present time is important
Ashish
Yaa nd thnx
Ruchi
had is past will in future may be or not be
Ashish
@ ruchi wlcme
Ashish
aap kaha se hai
Ashish
Why
Ruchi
shukla laga hai isliye
Ashish
aap se economics padna cahate hai
Ashish
No idea for economics
Ruchi
aap to naaraj ho gayi
Ashish
mai bhi bsc hu
Ashish
koi baat nahi nabattye
Ashish
Oh
Ruchi
ma econo.ics kiya hai
Ashish
lekin mixro macro thoda kam samajh me aayi hai
Ashish
Eco not my background
Ruchi
then what your bck ground
Ashish
Sychlgy
Ruchi
oh then you study abt my pshcology
Ashish
sry u r trying to study my sychlgy
Ashish
what is national income, pls?
Priscilla
what are the production costand cost of production
Didole
explicit cost
Didole
types of cost
Didole
production cost & cost of production r de same.
Priscilla
production costs r costs incurred for producing goods & services.
Priscilla
is an economic principle referring to a consumers desire and willingness to pay a price for specific goods and services
abdul
demand and supply
abdul
Explain economic growth with the use of ppf?
Michael Reply
what z the meaning of ppf
rivan
do u mean ppc
Nzenwata
Yes pls ppc
Michael
an expansionary fiscal policy could be achieved by what
David
if the price of cigarettes ,food and alcohol rised by 10% in a year ,which is most likely to affect the cpi the most.
David
what measures would be suitable for reducing a recessionary gap.
David
increasing the level of government government expenditure is an instrument of what
David
A reductionin income tax rates would blank the blank of the multiplier
David
progressive taxes may slow down economic recovery .This is as a result of what
David
money acts as a safe guard against inflation something and something one of a function of money
David
A rise in expenditure for consumer goods something and something ,one of the cause of cost- push inflation
David
PPC IS production possibility curve. It show possible good which can be produced by an economy with given resource and technology.
Tactful
Recessionary gap can be solved by Monetary and Fiscal policy
Tactful
What are the positive effects on the economy to legalize drugs?
Richard Reply
wat factor give raise to monopoly
Ebenezer Reply
a product which is unique /it has very less substitutes in the market. so this product has no much competition .... for example , railways
mikey
its a monopoly
mikey
does monology has factors or it has merits n demerits
rivan
monopoly or oligopoly is just a type of market in which demand and supply is measured to meet public interests
mikey
economy is all about psychological behaviour of humans to each other and to environment economists role is to keep everything in equilibrium
mikey
factors give rise to monopoly. 1. Patent right 2. Cartel 3. Govt policy. 4. Control over raw material. 5. money for investment
Tactful
oligopoly and monopoly are examples of imperfect market..
Nzenwata
First, second and third degree price determination under monopoly
Ruchi
please explain what is elasticity of supply
Austine Reply
is the responsiveness of quantity supplied of commodity to changes in its own price
rivan
accounts in balance of payment
Ikogor Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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