Types of public expenditure

Question 1

Types of expenditure

3

Answer 1

Capital Gov. Expenditure - spending on goods like roads, schools and hospitals that will be consumed in over a year

Transfer Payments - Payments where there is no corresponding output e.g. Benefits

Current government expenditure - interest payments on national debt

Question 2

Impact of Gov. Spending on Productivity & Growth

Answer 2

Infrastructure - efficiently run economy, geo. movement of labour, lower supply costs for firms

Education - increases human capital

Healthcare - reduces number of days workers lose to serious illness + improves quality of life

Sending - can create a multiplier effect in areas with high unemployment

Question 3

Living Standards

Answer 3

• Provides public goods - improves social welfare

- reduce absolute poverty through benefits

Question 4

Crowding Out

Answer 4

Gov. must borrow to spend above tax rev. Causes higher interest rates due to competition for finance w private sector. Discourages firms from future investment