Question

class: State and Local Finance

1.state and local government face three fundamental fiscal choices. please list these choices, and using an examples in specified government program, explain how these choice interact with each other, if at all

2."if school expenditures are selected by a majority vote,then most of the voters in the district will be perfectly happy with the selected amount of spending." Evaluate this statement.

3.richard musgrave has provided us with a 3-part defining state of the "role" of government. please describe each, and provide an example FOR EACH ROLE.

4.state's constitutions provide guidance regarding fiscal policy, and provide the operating parameters under which a budget is developed. describe the stages of the budget process in new york state, including relevant time period for specific activities. include a discussion of the player(executive/legislature) and their role in the process.

5.Government expenditures can be measured by examining the direct costs, as well as the results from the respective productions for direct outputs and consumer outputs. please describe these two relationships, and using a public good or serice provide examples of inputs used in the services and the types of outputs that could be measured.

Answer 1

1. State and Local governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence, in turn, curbs inflation (generally considered to be healthy when between 2-3%), increases employment and maintains a healthy value of money. Fiscal policy plays a very important role in managing a country's economy. For example, in 2012 many worried that the fiscal cliff, a simultaneous increase in tax rates and cuts in government spending set to occur in January 2013, would send the U.S. economy back to being in a recession. The U.S. Congress avoided this problem by passing the American Taxpayer Relief Act of 2012 on Jan. 1, 2013.

When inflation is too strong, the economy may need a slowdown. In such a situation, a government can use fiscal policy to increase taxes to suck money out of the economy. Fiscal policy could also dictate a decrease in government spending and thereby decrease the money in circulation. Of course, the possible negative effects of such a policy, in the long run, could be a sluggish economy and high unemployment levels. Nonetheless, the process continues as the government uses its fiscal policy to fine-tune spending and taxation levels, with the goal of evening out the business cycles.