AD Government Spending

Question 1

what affects the government spending(4)

Answer 1

1. national income (real GDP) / tax revenue
2. level of economic activity
3. the age of the population
4. unemployment

Question 2

how does national income / tax revenue affect Gov spending

Answer 2

higher income = more income tax = more revenue = use revenue to spend more = increase in AD

Question 3

how does economic activity affect Gov spending

Answer 3

businesses investing + producing / consumers spending money / companies offering jobs = more activity in economy (through etc.) = more tax paid to gov = more gov spending

Question 4

how does age of population affect gov spending

Answer 4

older population = more pensions = gov needs to spend more money
younger population = more self-sufficient = not require as much gov spending / spending by gov

Question 5

how does unemployment affect gov spending

Answer 5

high unemployment = more need for benefits = gov have to pay more towards benefits = more gov spending

Question 6

when does unemployment affect gov spending the most

Answer 6

during a recession