4.5.1 public expenditure Flashcards
What are some reasons for government expenditure?
- to provide public goods
- provide merit goods
- reduce negative effects of externalities
- achieve supply-side improvements
What is meant by capital expenditure?
money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.
What is meant by current expenditure?
Current expenditure is expenditure on goods and services consumed within the current year
What is meant by transfer payments?
a payment made or income received in which no goods or services are being paid for, such as a benefit payment or subsidy.
What is meant by crowding out?
The crowding out effect is an economic theory arguing that rising public sector spending drives down or even eliminates private sector spending.
Why might crowding out be considered undesirable?
- removes private firms
- use of financial resources
What might be the impact of high public expenditure on the national debt?
- increases and worsens national debt
Why might increase public expenditure be desirable?
Every public expenditure is considered desirable, when it is not wasteful, but has a positive effect on production, distribution, consumption and thus maximizes economic and social welfare of the country as a whole.
