Aggregate Demand - Government Expenditure

Question 1

Key influences on government expenditure

Answer 1

Trade cycle
Government policy
Fiscal policy

Question 2

During an economic downturn, unemployment rises, meaning that the government has to spend _______ on welfare and receives lower tax revenues. Businesses may also end up paying _____ tax as their economic activity decreases. This means that the government has to ________ its spending or borrow and accumulate debt

Answer 2

More
Less
Decrease

Question 3

Fiscal policy refers to the government’s tax and spending arrangements - different approaches to fiscal policy will therefore affect the level of government spending (a centre-right government may choose to _________ spending and taxation, while a centre-left one may prefer to _________ spending and taxation)

Answer 3

Reduce

Increase