Budgets at all levels of government reflect a complex interplay of internal and external factors that determine the level of government spending and the allocation of resources among an array of public, private, and merit goods produced by governments. Speculate how each of the following external events affects (1) total spending by a city or county and (2) the relative allocation of resources among spending categories. (What categories will see an increase in funding, and what categories are likely to see a decrease?)

A. A sectoral shift from manufacturing to retail shopping centers

(1) Effect on total spending (2) Relative effect on spending for infrastructure and economic development initiatives (3) Bonus: What changes in the tax base and revenue structure will occur?

B. A state mandate to recruit only police officers with at least two years of college education

(1) Effect on total spending (2) Relative effect on salaries, wages, and benefits

C. A state mandate to provide a freeport exemption to all business inventory (i.e., to eliminate the property tax on all business inventory held as raw materials or finished goods) (1) Effect on total spending (2) Relative effect on public safety, parks and recreation, administration, and public works.

Answer rating: 100% (QA)

Solution A 1 Total spending would decrease This is because a shift from manufacturing to retail woul... View the full answer