a) Influences on government expenditure

• describe how the trade cycle increases government expenditure

• contractions and troughs → economic decline

• higher unemployment rate + lower incomes

• higher unemployment benefit payments

• higher expenditure (to stimulate demand + to reduce unemployment)

• describe how the trade cycle decreases government expenditure

• expansions and peaks → economic growth

• lower unemployment rate + higher incomes

• lower expenditure (to reduce demand → to reduce inflation)

• describe how fiscal policy increases government expenditure

• fiscal policy → determines where tax revenue is allocated

• dictates higher expenditure in certain areas

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