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1、Part1–GettingStarted11Copyright?2014McGrawHillEducation.Allrightsreserved.NoreproductiondistributionwithoutthepriwrittenconsentofMcGrawHillEducation.Instruct’sManualtoaccompanyPublicFinanceTenthEditionbyHarveyS.RosenTedG

2、ayerChapter1–IntroductionBriefOutline1.PublicFinanceIdeologya.TheganicViewofGovernmentb.TheMechanisticViewofGovernmentc.TheViewpointofThisBook2.GovernmentataGlancea.LegalFramewki.FederalGovernmentii.StateLocalGovernments

3、b.SizeofGovernmentc.Expendituresd.Revenuese.OurAgendaSuggestedAnswerstoEndofChapterDiscussionQuestions1.a.McCain’sstatementisconsistentwithanganicconceptionofgovernment.Individualstheirgoalsarelessimptantthanthestate.b.L

4、ockemakesaclearstatementofthemechanisticviewofthestateinwhichindividuallibertyisofparamountimptance.c.Chavez’sstatementisconsistentwithanganicviewofgovernment.Theindividualhassignificanceonlyaspartofsocietyasawhole.2.Lib

5、ertariansbelieveinaverylimitedgovernmentareskepticalabouttheabilityofgovernmenttoimprovesocialwelfare.Socialdemocratsbelievethatsubstantialgovernmentinterventionisrequiredfthegoodofindividuals.Someonewithanganicconceptio

6、nofthestatebelievesthatthegoalsofsocietyaresetbythestateindividualsarevaluedonlybytheircontributiontotherealizationofsocialgoals.a.Alawprohibitingreceivingcompensationfgandonationwouldbeopposedbylibertariansastheywouldwa

7、ntthemarkettodecidewhobuyswhosellsgansatwhatpricetheganswouldbesold.Socialdemocratsalsomightopposethelawiftheyconsiderthatsuchalawwouldpreventgandonationfromhappeningasfrequently.Howevertheyarelikelytosupptthelawonthegro

8、undsthatpayingfgandonationwouldcoercefinanciallydesperatepeopletoselltheirgans.ThelawwouldprotecttheindividualfrommakingapoPart1–GettingStarted13Copyright?2014McGrawHillEducation.Allrightsreserved.Noreproductiondistribut

9、ionwithoutthepriwrittenconsentofMcGrawHillEducation.4.a.Ifthesizeofgovernmentismeasuredbydirectexpendituresthematedoesnotdirectlyincreaseit.Costsofcompliancehowevermaybehighwouldappearasanincreaseina“regulatybudget.”b.Th

10、isbanwouldnotincreasegovernmentexpendituresbutthehighcostsofcompliancewouldincreasetheregulatybudget.c.It’shardtosaywhetherthisrepresentsanincreasedecreaseinthesizeofgovernment.OnepossibilityisthatGDPstayedthesamegovernm

11、entpurchasesofgoodsservicesfell.AnotheristhatgovernmentpurchasesofgoodsservicesgrewbutataslowerratethantheGDP.Onemustalsoconsidercoincidentfederalcreditregulatyactivitiesstatelocalbudgets.d.Thefederalbudgetwoulddecreasei

12、fgrantsinaidwerereduced.Howeverifstatelocalgovernmentsoffsetthisbyincreasingtaxesthesizeofthegovernmentsectasawholewouldnotgodownasmuchasonewouldhaveguessed.5.Theinflationerodestherealvalueofthedebtby0.036x￡904billion￡32

13、.54billion.Thefactthatinflationreducestherealdebtobligationmeansthatthisfigureshouldbeincludedasrevenuetothegovernment.6.Ifyouconsiderthesizeofgovernmentastheextenttowhichsociety’sresourcesaresubjecttocontrolbythegovernm

14、entthebothPolicy1Policy2wouldincreasethesizeofgovernmentbythesameamount.WhileitseemsPolicy1hasnoeffectofthesizeofthegovernmentbecauseitonlymatesprivatespendingitcausesresourcestobeunderthecontrolofthegovernment.Policy2se

15、emstoaffectthesizeofthegovernmentbecauseitchangesrevenuestransfersbutthecosttoeachhouseholdisthesameasinPolicy1a$5000expenditureonhealthinsuranceinadditionaltaxes.7.RelativetoGDPdefensespendinggrewfrom5.0percentofGDPin19

16、81to6.0percentofGDPin1985thengrewfrom3.9percentofGDPin2007to4.7percentofGDPin20011.Theincreasefrom2007to2011wasproptionallylargerbutbothincreaseswerethesameintermsofthepercentagepointincrease.8.a.Ftheyears1997to2001theab

17、solutechangeinfederalexpenditureswas$261.7billion[$1862.8$1601.2billion]thechangeinfederalexpendituresinrealterms(2001dollars)was$146.26billion[inflationrate=(90.72784.628)84.628=7.21%$1862billion–$1601(10.0721)=$146.26b

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