1.Government

Many central bankers want advanced economies to boost government spending to snap the global economy out of its funk. Winning cooperation from elected officials is proving difficult.

In the U.S., government outlays on goods and services as a share of the economy have fallen to historic lows. Consumption and investment by all governmentslocal, state and federal combineddropped to 17.6% of gross domestic product in the fourth quarter of 2015, matching its lowest level in 66 years, according to the Commerce Department. Meanwhile, demographic changes have pushed up government transfer payments to individuals.

A clash over government spending is playing out around the world, deepening worries about relying on overburdened monetary policy. The debate, already a focus of the Group of 20 leading economies, is expected to get added attention this week when financial officials gather for the International Monetary Fund's spring meeting in Washington.

Fed officials and counterparts in other central banks have already forced down interest rates and launched multiple rounds of asset purchases to spur an economic expansion. Many say it's past time for fiscal policy to step in and take advantage of low rates to funnel money into infrastructure and other projects.

"There's no getting around the fact that monetary policy in the United States and many other advanced countries has been under a substantial burden and has not gotten a lot of help from fiscal policy," Fed ChairwomanJanet Yellen(Links to an external site.)

said recently(Links to an external site.)

.

Fiscal policy makers say they are trying to bring down debt loads after driving them up during the recession. Some face intense debates about the size and role of government in their economies.

In the U.S., where debt held by the public is at 75% of economic output, the political pressure is to cut spending. In the U.K., Chancellor of the ExchequerGeorge Osbornevows to produce(Links to an external site.)

a budget surplus by 2020. And in the eurozone,governments are resisting(Links to an external site.)

the policy changes and spending boost the European Central Bank wants.

The decline of U.S. government spending highlights the difficulty of resolving that standoff between monetary and fiscal policy makers, particularly at a time of exacerbated political tension.

Aging populations in developed countries are burdening public-pension programs and sparking fears that tomorrow's labor force will be too small to pay off today's debts.

In the U.S., the drop in government investment has been matched by an increase in automatic transfer payments through programs such as Social Security, Medicare and other state and federal social benefits.

As the American population ages, those programs will consume a larger share of spending, boosting government debt in the process. Transfer payments made up 15% of GDP in last year's fourth quarter, up from 11.4% two decades ago. That has replaced other forms of spending and refashioned the relationship between the government and citizens.

Now policy makers are in a bind, trying to boost investment in infrastructure and educationwhen so much public money already goes to retirement programswithout sending government debt to unmanageable levels.

At the same time, government investments help lay the groundwork for higher productivity and better long-run growth.

ToAndrew Biggs,an economist at the conservative American Enterprise Institute, rising government debt will crowd out private investment, making less money available for businesses to invest. The solution, he said, is to curb the rise in transfer payments.

"If you didn't have as generous a Social Security benefit, [workers] would be saving more on their own," he said. "That would mean a larger capital stock, more investment in stocks and bonds and companies and less implicit debt."

On the other side of the debate are former Congressional Budget Office director Doug Elmendorf and Louise Sheiner, a senior fellow at the Brookings Institution, who think ultralow interest rates should tip the scales in favor of more government borrowing and investment.

While the federal government will eventually have to deal with its debt, now isn't the time to do it, they wrote in arecent paper(Links to an external site.)

. Yields on 10-year Treasury bonds have spent most of 2016 below 2%, making this the time to borrow money for public investments, they argue.

Ms. Yellen appears to be falling into that camp, while acknowledging the tension between the country's high debt burden and its need for more investment. In the end, she said, borrowing costs make all the difference.

"With real rates as low as they are," she said, "investment-oriented fiscal policies, it seems to me, there's a case for that."

This is for the Government article. Per the article, government transfer to individuals are __________________. These government transfers ______________ part of GDP.

. Increasing; are

B. Increasing; are not

C. Decreasing; are not

D. Decreasing; are

2.This is for the Negative Interest Rate article. Use the Aggregate Demand and Aggregate Supply model.

Critical thinking: Per the article, individuals are buying ___________________ homes. This is an example of individuals putting their wealth in their homes. If home prices decreases then homeowners will be ________________. Due to this they will _______________ their consumption.

Group of answer choices

A. More; poorer; increase

B. Less; richer; increase

C. More; richer; increase

D. Less; poorer; decrease

E. More; poorer; decrease

F. Less; poorer; increase