public debt and shit quick learn Flashcards
What is the total amount that the government spends is known as?
Total managed expenditure
3 types of public expenditure
Capital expenditure- long term investment expenditure
Current expenditure- day to day expenditure on goods and services
Transfer payments- payment by state to individuals without exchange of goods and services. In the aim of redistributing income.
Capital expenditure-
long term investment expenditure
Current expenditure
day to day expenditure on goods and services
Transfer payments
payment by state to individuals without exchange of goods and services. In the aim of redistributing income.
5 reasons for changes in public expenditure?
The economic cycle- In periods of recession public expenditure rises
Changing age distribution- Ageing populations place greater pressure on established healthcare systems
Changing expectation- New technology results in increased expectations.
Financial crises- Government may have to spend money bailing out financial institutions.
Economic philosophy- A country’s model of economy varies. eg European countries have higher taxation and higher public expenditure in comparison to the USA.
What impact can changes in the size of public expenditure have on productivity and growth?
Public spending on infrastructure leads to improved supply side performance in an economy.
Free market economists argue that cutting public expenditure will lead to spending on the private sector resulting in more efficient and productive outcomes.
What impact can changes in the size of public expenditure have onliving standards?
With 0 public expenditure there would be be market failure and absolute poverty would exist.
Resource crowding out
Resource crowding out when the economy is working at full employment expansion of the public sector means that there is a shortage of resources in the private sector.
Financial crowding out
when the the expansion of the state sector is financed by increased government borrowing. Causing increased demand for loanable funds that drive up interest rates and crowds out private sector investment.
What impact can changes in the size of public expenditure have onlevel of taxation?
If public expenditure is high then level of taxation must also be high to fund this.
Free market economists favour lower levels of public expenditure to allow free enterprise to grow and generate economic growth.
What impact can changes in the size of public expenditure have onequality?
Public spending on education can help to create more equal opportunities for citizens.
High levels of public expenditure can mean higher benefits and pensions, which improved living standards.
What are the 3 categories of taxation?
Progressive- as income rises a larger % of tax is paid
Proportional- the % of income paid is constant, no matter what the level of income.
Regressive- as income rise a smaller % of income is paid in tax
