Public Expenditure Flashcards Preview

Economics Unit 4 > Public Expenditure > Flashcards

Flashcards in Public Expenditure Deck (9)
Loading flashcards...

What is public expenditure?

Government spending includes all forms of spending by central government and local governments


What are the three main types of spending?

1. Capital expenditure
2. Current expenditure
3 transfer payments


What does capital spending include?

Capital projects and creating new assets. Investing to increase capital stock of the economy--- hospitals and roads


What does current expenditure include?

Items that are recurring and only last a limited time --- teachers wages and public sector


What does transfer payments include?

From the government to individuals -- welfare payments


What are the two key measures of government spending?

1. Real government spending - adjusted for inflation
2. Government spending as a % of GDP- share of national income


Factors influencing the amount of public expenditure (4)

1. State of the economy-- level of unemployment
2. How efficient the market is- if efficient less spending as no market failure
3. The system of the market- different countries
4. Equity and Equality- if inequitable distribution of resources- GS increase and with inequality


Impacts of higher government spending (3)

1. More investment in education and infrastructure -- positive externalities help
2. Retribution of income
3. Fiscal policy- in recession


Evaluation of higher government spending (6)

1. Higher taxes to fund spending
2. Potential inefficiency of spending- lack a incentive
3. Crowding out- government tax to spend but leaves people without money anyway
4. Nested interests of public sector- once started spending it's hard to stop
5. Kind of spending- transfer payments can reduce efficiency
6. Efficiency- no reason to be inefficient