2.6.2 Fiscal Policy - Government Spending

Question 1

define government spending

Answer 1

refers to money that a government allocates to fund various state-provided programmes and public services
financed through taxes and government borrowing

Question 2

what are the three areas of government spending

Answer 2

• welfare spending
• current spending
• capital spending

Question 3

define current spending

Answer 3

government spending on day to day running of providing public sector services

Question 4

give examples of current spending

Answer 4

• salaries of NHS employees
• drugs used in healthcare
• road maintenance budget

Question 5

define capital spending

Answer 5

government spending on long-term investment projects aimed at improving the productive capacity of the economy

Question 6

give examples of capital spending

Answer 6

• construction of new motorways and bridges
• new equipment used in the NHS
• defence equipment

Question 7

define a transfer payment

Answer 7

a payment made of income received in which no goods and services are being paid for

Question 8

what is the significance of government spending

Answer 8

• influences AD
• helps to stabilise demand in a recession
• has a regional economic impact
• important in providing public and merit goods
• driver of long-run growth
• can help achieve greater equity