Eco200: Practice Test 1 Covering Chapters 10 through 15

3. Federal and State Expenditures:a. Social Security payments have increased dramatically. Explain why this is a problem and what iscausing the increase?b. What is the single-most largest expenditure for state governments?c. What is the single-most largest expenditure for the federal government?Solution: Chapter 12, Social Security…a. Increasing in life expectancy, “Baby Boom” generation retiring, health care costs have risen morerapidly than the cost of other goods and services produced in the economy…b. State governments usually possess the largest expenditures in Education…c. This is somewhat of a trick question because the federal government spends about the same forNational Defense and Social Security Payments, 456 billion (in 2004) on National Defense and496 (in 2004) on Social Security Payments. Many people believe that National Defense is thelargest expenditure for the federal government, which is a common misperception.