Question

Which of the following is true about the government purchases component of U.S. GDP in 2007?

A) The entire amount was composed of federal government purchases because state and local governments are not included.
B) Most of the spending on education and law enforcement occurs at the federal level.
C) Purchases by the federal government are greater than purchases by state and local governments.
D) Purchases by state and local governments are greater than purchases by the federal government.

Answer 1

The correct statement concerning the government purchases component of U.S. GDP in 2007 is that state and local government purchases are greater than federal government purchases.The correct answer is option D

Step-by-step explanation:

The correct statement about the government purchases component of U.S. GDP in 2007 is that purchases by state and local governments are greater than purchases by the federal government. This is evident from the fact that a substantial portion of state and local government expenditures is allocated to education, which, along with other services such as highways, hospitals, and police and fire protection, accounts for a significant percentage of their budget.

Since education spending at the state and local level far exceeds federal education spending, and given that such spending is included in the GDP calculation as it involves the purchase of goods and services, the statement that state and local government purchases are greater holds true.The correct answer is option D