Government Expenditure

Question 1

What would the government do during an economic boom?

Answer 1

Most likely to spend more, investing in things like infrastructure, as they have collected higher taxes from consumers and firms.

Question 2

What is the likely effect of a recession on government expenditure?

Answer 2

The government are likely to spend more strategically in order to stimulate economic growth. By spending more to try and decrease unemployment, demand in the economy will rise, and the government will have to pay less welfare benefits.

Question 3

Does the governments tax revenue rise or fall during a recession?

Answer 3

Fall.

Question 4

What is fiscal policy?

Answer 4

Government policies relating to taxation and spending.

Question 5

What is a budget surplus?

Answer 5

When tax revenue is greater than spending.

Question 6

What is a budget deficit?

Answer 6

When spending is greater than tax revenue. When a government runs a budget deficit, they will have to borrow.

Question 7

What are some examples of government spending (3)?

Answer 7

1) Spending on education to invest in human capital.
2) Spending on housing to make it more affordable.
3) Spending on transport to increase labour mobility.