role of state of maroecon

Question 1

types of expenditure

Answer 1

capital - investment goods roads schools hospitals
transfer - no output money from one group to another
current - government final consumption plus transfer payments plus interest payments.

Question 3

auto stabiliser

Answer 3

reduce the impact of changes in the economy government spending and taxation are automatic stabilisers. In a recession, benefits increase overall fall in AD is reduced,

boom, tax increases as people have more jobs and higher incomes, and this tax reduces disposable income so decreases consumption and AD, meaning that demand doesn’t grow too high.

​cannot prevent fluctuations reduce the size of these problem and there can be negative aspects to these stabilisers