Military spending or defence budget represents half of all discretionary government spending in U.S.?

Military spending or defence budget represents half of all discretionary government spending in U.S. The total size of America’s defence budget is currently at around $700 billion a year, including war expenditures. While it is less than 5% of U.S. GDP, this amount is as big as the sum of those of the world’s next twenty highest military spending countries.

In face of the growing government debt, Robert Gates, the defence secretary started a series of “efficiency savings” actions to reduce military spending. In early January, Mr. Gates announced to further $78 billion worth of cuts over the next five years, which is a politically controversial issue.

a. According to the 2010 fourth-quarter output, the American economy is running a full $800 billion (5.7%) below its potential GDP and the unemployment rate is above 9%. Use the AD-AS model to discuss the impact of the defense budget cut on U.S. economy. (5 marks)

b. What may the Fed do to lessen the impact of the defense budget cut on employment and real GDP? What might be the potential obstacle? (5 marks)

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  • 1 decade ago
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    Defense spending is historically low, and probably lower than it should be considering our present and complicated situations around the world. The bigger problems are obvious if you take look at the budget as a whole and consider the future directions. The source below gives really good graphs to help you understand.

    First graph is for the history of military spending.

    http://www.heritage.org/budgetchartbook/obama-budg...

    Take a look at this one:

    http://www.heritage.org/budgetchartbook/entitlemen...

    Source(s): Source: White House Office of Management and Budget.
  • 4 years ago

    The frequency of friendly fireplace incidents is amazingly plenty exaggerated. people have very selective innovations consistent with the situation they are from. via fact the wars began in 2001 the U. S. has been in value for the deaths of three British troops. The British have been in value for 5. There are additionally the two danish infantrymen killed via using British troops. in line with capita the British easily have extra desirable cost of friendly fireplace (Do the mathematics.). u . s . has MANY extra desirable troops in u . s . a . and provides maximum all close air help for all NATO forces. this would easily develop the possibilities of friendly fireplace going on. it fairly is easy to make judgments as properly the indisputable fact that it fairly is larger truthful to easily seem on the suggestion till now you bounce out and "OMG persons R DUMB!!!!" The incidents are fairly no longer as black and white as some opt to think of of. One recommendations-blowing incident is the USAF plane that dropped a bomb on British forces and killed 3. Now it fairly is easy to think of of that American forces have been in value. a extra learn proved that a British forward air controller had given American pilots the incorrect coordinates. The forward Air controller grew to alter into into tried for manslaughter.

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