Final answer:
The federal government is planning to conduct a 'case study' of Arkansas's budget plans over the past five years, which is a research approach meant to analyze detailed information on a specific case. This is part of their interest in understanding how state budgets are managed, which are subject to trends of increasing revenues and spending across various levels of government.
Step-by-step explanation:
The federal government's interest in analyzing how states manage their finances suggests that it is seeking a detailed and empirical approach to studying financial practices. In this context, the best fit for the blank in the sentence would be "case study." A case study is a research method used to investigate in-depth the development of a particular project, group, individual, or situation over a certain period. Given that the question refers to the federal government examining Arkansas's budget plans from the past five years, a case study would be the appropriate method to gather detailed and contextual data about the state's budgetary decisions and expenditures.
It's relevant to note that all levels of government, including federal, state, and local, manage budgets, which are crucial for planning how they will receive revenues and allocate spending. Over the past few decades, there has been a generally upward trend in spending and taxes for both state and local governments as well as for the federal government in the United States.