Public Expenditure

what 3 things the goverment spends on

capital expenditure

current expenditure

transfer payments

what is capital expenditure

goverment spending on long-term assetswith rewards in the long term

what is current expenditure

goverment spending on recurring costs

what is transfer payments

goverment spending with nothing in return

e,g job sekkers allowance

diffrence between goverment spending and public expendiutre

goverment spending does not include transfer pricing

factors that influence public expenditure

1. Age distrubution

2. Incomes

3. Political values

P.I.A

how does age distrubution affect public expenditrue and example

Japan ageging population - priorites healthcare and pension payments

Botswana - 1/3 under 15 so priortised education

how does income infulence public expenditure

increase income , increase demand for goverment goods and services , increase public expenditure

what is Wagner’s Law

Demand for goverment goood and serivces os income elastic

evalutaion for incomes influence on public expenditure

depends on type of goods goverment provide s, some public expenditure goes towards inferior goods e.g public transport system , demand for slow public bubses will decrease as income increases

how does politicila vaue affect public expenditure and example

Danish people trust the goverment so prepared to have higher tax for increase in public expenditure

less people trust goverment in USA

so vote for less tax and decrease in public expenditure

What areas affected by changes in public expenditure

Productivity and growth

living standards and quality

crowding out

how is productivity and growth affected by public expendityre

increase capital expensdurte and inrease in current expenditure , increase G , increase AD , increase economic growth , increase LRAS , increae econmic growht further

evalutaion for how public expenditure affecte productivity and growth

dependsw on quality on sepndings e,g burecrucy or spending inefficenlyy

how does public expenditure affect libing stanstrads and equality

increase benefits , increase incoem , reducing inquality

incease healthcare , increase producviyt , omcrease incoem , reduce inequality , increae living standrads

evalutaion for how public expenditrue affects living standrads and equality

spend on services that may not benefit the lower incoem e.g milatray

what is resource crwoding out

when all resources in economy are being used efficenlty , public secore takes all reosurces form private secote

e.g increase sepnging on social housing , increase oportunity cost for privarte hosuing , less land available

what is fancial crwoding out

goverment borrwo monye , increase demand for borrowed money , increase price for bowrrowed money , intrest rates , decrease investment from private sector