Question

An expenditure that provides benefits for longer than the current period is a revenue expenditure.

A. True
B. False

Answer 1

The statement in question is false; an expenditure that provides long-term benefits is a capital expenditure. This response also clarifies True or False statements regarding federal spending and policies, including the purposes of contractionary and expansionary fiscal policy.

Step-by-step explanation:

An expenditure that provides benefits for longer than the current period is known as capital expenditure, not revenue expenditure. Therefore, the statement "An expenditure that provides benefits for longer than the current period is a revenue expenditure" is False.

With regard to the provided True or False statements concerning federal spending and policies, here are the accurate responses:

1. Federal spending has grown substantially in recent decades. - True, in nominal dollars.
2. By world standards, the U.S. government controls a relatively large share of the U.S. economy. - False
3. A majority of the federal government's revenue is collected through personal income taxes. - True
4. Education spending is slightly larger at the federal level than at the state and local level. - False, education spending is much higher at the state level.
5. State and local government spending has not risen much in recent decades. - False, it has risen about 50% as a share of GDP.
6. Defense spending is higher now than ever. - False
7. The share of the economy going to federal taxes has increased substantially over time. - False
8. Foreign aid is a large portion, although less than half, of federal spending. - False; it's about 1%.
9. Federal deficits have been very large for the last two decades. - This needs context. There were budget surpluses from 1998-2001, but large deficits in 2003 and 2004, which continued into the later 2000s.
10. The accumulated federal debt as a share of GDP is near an all-time high. - This statement requires up-to-date figures for confirmation.

The main reasons for employing contractionary fiscal policy during strong economic growth are to prevent inflation and to keep prices from rising too rapidly. The aim of expansionary fiscal policy during a recession is to increase employment and stimulate economic growth. In a recession, the actual budget surplus or deficit usually falls below the standardized employment budget because tax revenues are lower than expected.