Question

Referring to the 1980s period, discuss an example of a change in autonomous spending. What is a government policy implemented during that time and a multiplier effect it had on the economy.

Answer 1

When autonomous spending increases or decreases it has multiplier effect on GDP. One of the investments made by United States that was a big amount for the country had been Entitlement Spendings. These spending are subset of mandatory spending; and are called "entitlements" as people need to satisfying given eligibility requirements set by past legislation are entitled to Federal government services or benefits. These are a change in the autonomous spending as ever since, the Great Depression during 1930s era, the Entitlement spending on sections such as pensions of government, healthcare has increased from 1.5% to 5% respectively. The programs such as Medicare modernization act, Health Insurance program, and Medicare Advantage, Supplementary Medical Insurance Program had a positive multiplier effect it had on the economy. Moreover the government could forecast its future spending that included policies such as Medicare and Social Security Trustee, and several more. Such programs have been beneficial and showed a positive result among the citizens of the country