4.5

Question 1

Reasons for the changing size and composition of public expenditure

Answer 1

• Attitutes of countries eg USA has much lower state spending making up for significant differences in developing countries gov spending ( becasue of their economy type)
• Depends on incomes of countires eg high income = increased demand for gov services eg increased technology= increased demand for NHS to intorduce = increased spending compared to poor countries
  > Low income countires spend less of real GDP becasue of tax avoidance, poor tax collection and small amount of wealth to tax
• Global finacial crisis= increased gov spending due to welfare paymentd and some govs used taxpayer money to bail out banks
• Ageing populations eg Japan = increased spending on pensions in LR

Question 2

Impact on high gov spending on productivity and growth

Answer 2

• Infrastructure= increased efficiency= increased productivity= increased growth
• Education= creates human capital needed for growth
• Healthcare= reduces number of days workers lose from serious illness
• Creates multiplier effect= increased growth