U.S. federal government expenditures are comprised of purchases of goods and services (defense spending plus spending on all day-to-day activities), transfer payments, interest payments, and grants to state and local governments. Which of the following statements is true?
Transfer payments are the largest component of the federal budget (about 50%) followed by defense spending (about 20%), while spending on all its day-to-day activities is the smallest component (about 8%).
