1 En ment and mandatory terms in budget are misleading The term en ment is a budgetary term that was established by the government to mean those programs that are outside the appropriation norm of other programs. Therefore, they can be referred to as protected type of spending in an attempt to predict the beneficiaries of the program. The failure to scrutinize this kind of programs creates a loop hole for embezzlement and the occurrence of deficits. Social security and Medicare programs enjoy the privileges’ of the entitlement program.
The use of entitlement programs can create long run problems in financing them. It creates unnecessary controversy in that it can be used to mean: making payments to any person, business or an organ of government that is entitled by the law. These programs are controlled by congress and they have the mandate to establish the rules for eligibility and benefits. The term gives the programs an obligation to spend which is inappropriate. Mandatory spending forms part of the entitlement program. Actually more than eighty two percent of entitlement is mandatory spending. The use of mandatory in the budget carries a negative weight on the taxpayer.
In context, the term may mean uncontrollable spending and legislatures can put the conditions under what the spending occurs. 2 The trade deficit reduces our GDP- explain Balance of trade is the difference between the imports and the exports and a trade deficit occurs when a country consumes more than it produces. When the other factors are held constant, trade balance affects the GDP in that a surplus increases the GDP while the deficit reduces it. Income payments, loans and aid from abroad are components that affect the GDP.
A trade deficit on the long run can lead to foreign debt and eventually a current crisis arises. 3 A publisher buys paper, ink, and computers to produce textbooks. Which of these purchases is included in investment spending? Investment spending is the purchase of capital goods with the aim of creating production using them. These may include machinery and equipments and therefore, the only investment spending carried out by the publisher was the purchase of computers 4 Should we be more concerned with the rise in nominal or real GDP?
Explain Nominal GDP is calculated using the growth rate without taking into account the inflation rate of the economy. The use of the nominal GDP to measure the progress of the economy is misleading as it fails to recognize the inflation rate. Real GDP takes into account the inflation rate and will therefore give the actual GDP and therefore advisable to use the real GDP rather than using the nominal GDP. 5 Why is consumer confidence such a closely watched indicator Consumer spending is based on the purchase of commodities essential for life.
Consumer confidence comes in the fact that the consumer will buy the same commodities over and over again. There are many shops over the internet and purchase in through the credit card. If consumers trusted the safety of their money, more purchase would be made but due to the lack of such confidence, many consumer shy away. A product that the consumers believe has a good quality will register high purchases than that with uncertainties.