From an economic perspective the optimal level of government spending occurs when
A) spending is financed by an equal amount of taxes.
B) no more than 50 percent of the GDP is spent by government.
C) the president controls the amount of spending by using the line-item veto.
D) the value of extra benefits derived from an extra dollar of government spending is equal to the dollar of cost.
E) the government has reached the statutory limit of its borrowing as established by Congress.

Question

Quizplus · Accepted Answer

The optimal level of government spending occurs when the value of extra benefits derived from an extra dollar of government spending is equal to the dollar of cost. This is known as marginal cost equals marginal benefit, and it ensures that resources are allocated efficiently and that the government is getting the most out of its spending. A and B are arbitrary measures that do not necessarily guarantee optimal spending, C is a political tool that may not align with economic efficiency, and E implies that the government has already exceeded its optimal level of spending.

From an Economic Perspective the Optimal Level of Government Spending