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A Discussion On Transfer Payments, Resource Use, Government Forms

1. What is the difference between transfer payments and government purchases? How has the mix of transfers and government purchases changed in the federal budget since 1960? List the most important transfer payments in the federal budget. What significant changes have occurred in the mix of all categories of federal government expenditures since 1960?

2. A prominent senator has calculated the total social benefit of the current amount of space exploration at $3 billion a year. The total social cost of space exploration is currently only $2 billion. The senator argues that a net gain to society would result by increasing the amount of space exploration until the total cost rises enough to equal the total benefits. Is the senator's logic correct? Provide reasons to support your opinion about the efficiency of resource use.

3. Contrast the various government forms (federal, state, and local), and provide an analysis of their varying sources of revenue, expense structures, and "typical" products provided to the public.

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Transfer payment is like expenditure that is not used for goods and services, but it is used for the social security and welfare of societal people, while the government purchase is a term that is financed by the mixture of borrowing and taxes (Arnold, 2008). The government purchases are generally used for buying those services or goods that could be required for running the government along with the infrastructure related to public such as highway construction.

In federal budget, the major important transfer payments are social security, disability payment, public welfare, compensation and unemployment. The federal government covers those issues, problems and laws that impact on the defense system of country, border security, and foreign affairs along with the workplace safety. The state government deals with the problems of state visitors, and those rules and policies that could affect the state residents along with business organizations. Local government works under the administration of state government that seeks the problems related to the public such as road maintenance, collection of garbage etc.
In 1960, the percent of government purchases was about 22-23% of total GDP, while the government transfers were 30% of GDP. Therefore, the government made a policy to increase its transfer payments on the matter of ...

Solution Summary

The solution discusses transfer payments, resource use and government form.