LS15- Public Expenditure

Question 1

Current government expenditure

Answer 1

• governments day to day expenditure on goods and services
• e.g. wages of civil servants and drugs used by NHS

Question 2

Capital government expenditure

Answer 2

• government expenditure on infrastructure such as roads and hospitals

Question 3

Transfer payments

Answer 3

• payments given by the state to individuals e.g. pensions

Question 4

Reasons for changing size and composition of public expenditure

Answer 4

• economic development/ rising incomes
• changes in structure of population
• stage in business cycle
• financial crisis
• levels of government

Question 5

Impacts of changes in levels of public expenditure

Answer 5

• productivity
• living standards
• taxation
• inequality
• crowding out/in

Question 6

How public expenditure affects productivity + growth

Answer 6

• free market argue gov spending is wasteful and inefficient- however, gov are able to enjoy EoS when it provides goods, and this improves productivity
• also provides infrastructure, such as roads, necessary for economy to run efficiently
• education creates human capital necessary for growth whilst healthcare system reduces number of days lost by workers due to illness
• through spending, government can create a multiplier effect and this can be focused on areas of the country with high unemployment, creating growth

Question 7

How public expenditure affects living standards

Answer 7

• corrects market failure and provides public goods to improve social welfare
• important to reduce absolute poverty, and raise health levels and infrastructure

Question 8

How public spending increases equality

Answer 8

• it leads to redistribution and helps to provide a minimum standard of living for the poorest in society
• ensures everyone has access to basic goods, such as education and healthcare, which will help to give them a fair start in life