Federal government discretionary outlays ($ billions)

2000 2014

Defense outlays 294,363 603,457

Nondefense outlays 1,494,587 2,902,632

Composite outlay deflators (2009 5 1.00)

Defense 0.7235 1.0510

Nondefense 0.8134 1.0893

a. Compute the percentage change for federal defense and nondefense outlays in current-year dollars from 2000 to 2014. Divide that change into its real and price components.

b. For nondefense outlays, convert the deflator base to 2000 5 1.0000, and recal-culate the absolute change in these real dollars and compare that with the absolute change with 2009 5 1.000. Why might budget strategists try to use one or the other of these two numbers to argue for more or less spending? Is either of the two base years more correct? Explain. Compute and compare the real percentage increases using the two different base years.