Macroeconomics was born out of the idea that fiscal policy could be used to stimulate the economy. In this chapter, we consider how decisions on government taxes and spending affect the decisions of individuals to consume and save.
In 2016, the current income of federal, state, and local governments in the United States came to $5.313 trillion. Of this amount, $4.980 trillion was raised as tax revenue—the rest from other sources. The government distributed $2.786 trillion in transfer payments, leaving it with $2.527 trillion to pay for $2.658 trillion in consumption expenditures, $672 billion in interest on government debt, and $62 billion in subsidies. That left a current account deficit of $865 billion, most of which ...
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