4.5.1 public expenditure

Question 1

what is public expenditure?

Answer 1

• spending by the public sector in goods and services such as education and healthcare

Question 2

what is capital spending?

Answer 2

• infrastructure spending such as new roads and motorways

Question 3

what is current spending?

Answer 3

• spending on state provided goods and services that are provided on recurrent basis

Question 4

what are transfer payments?

Answer 4

• welfare payments made available through the social security system

Question 5

what are reasons for changing size and composition of public expenditure?

Answer 5

• income
• market orientation
• aging population
• war / natural disasters

Question 6

How can public expenditure contribute to productivity and economic growth?

Answer 6

• increase in public expenditure on investments eg: education and healthcare can enhance to human capital = increase productivity and long term economic growth

Question 7

How can public expenditure contribute contribute to living standards?

Answer 7

• an increase in welfare spending such as education and healthcare can provided peoples with social safety nets = increases living standards

Question 8

How can public expenditure contribute to crowing out?

Answer 8

• excessive government spending can lead to crowding out, increased government borrowing raises IR = which can reduce private sector investment and economic growth

Question 9

How can public expenditure contribute to level of tax?

Answer 9

• higher public expenditure may require higher taxes = can impact disposable income and economic incentives

Question 10

How can public expenditure contribute to equality?

Answer 10

• Public expenditure can reduce income inequality by providing social support to disadvantaged backgrounds