ACCORDING TO THE CASE STUDY ANSWER THE FOLLOWING QUESTION IN DETAILS

GDP is the sum of consumption (C), investment (I), and government (G) expenditures in a closed (no goods in or out) economy. That is, GDP=C+I+G. In the United States, the government is taking an increasing share of resources and this has trended sharply upward since 1947. Federal defense spending is running at a rate of about 5 percent of GDP; federal non-defense spending is at 7 percent; and state and local government is approximately 12 percent-a total of 24 percent of the U.S. GDP. This number does not include transfer payments like Social Security.

If the trend continues, the amount of government expenditure could have a very negative impact on the nation's ability to consume goods and build plants and equipment for future economic growth. Former U.S. Federal Reserve Chairman Alan Greenspan gave a clear warning of this threat when he stated before Congress, "Unless we do something to ameliorate it [federal budget deficits] in a very significant manner, we will be in a state of stagnationGDP is the sum of consumption (C), investment (I), and government (G) expenditures in a closed (no goods in or out) economy. That is, GDP=C+I+G. In the United States, the government is taking an increasing share of resources and this has trended sharply upward since 1947. Federal defense spending is running at a rate of about 5 percent of GDP; federal non-defense spending is at 7 percent; and state and local government is approximately 12 percent-a total of 24 percent of the U.S. GDP. This number does not include transfer payments like Social Security.

If the trend continues, the amount of government expenditure could have a very negative impact on the nation's ability to consume goods and build plants and equipment for future economic growth. Former U.S. Federal Reserve Chairman Alan Greenspan gave a clear warning of this threat when he stated before Congress, "Unless we do something to ameliorate it [federal budget deficits] in a very significant manner, we will be in a state of stagnation

Question three

1. . ----------------- focuses on the behavior of the individual actors on the economic stage , that is, firms and individuals and their interaction in markets.

2. In free market economy, the organization and interaction of producers and consumers is accomplished through the -------------- system.

3. An economic system:

4. The regulatory mechanism of the market system is:

5. Which of the following is not an economic cost?

6. From society's point of view the economic function of profits and losses is to:

7. The invisible hand refers to the:

8. The invisible-hand concept suggests that:

9. Two major virtues of the market system are that it:

10. The simple circular flow model shows that: