Download Government Spending

By Lauren, Toni and Lydia
AD = C+I+G+(XM)
Government spending includes: Social Security,
NHS, Transport, Education, Defence, Debt
Interest, Industry & Agriculture, Law & Order,
Housing & Environment and others.
The extent of market failure and the ability to
correct it – In economies where government
intervention is high (Command economies. Eg.
North Korea), government spending forms a
large proportion of AD than in countries where
free market forces play a greater role (Market
economies . Eg. America).
The level of economic activity in the economy
can influence government spending. For
example: if there is a high level of
unemployment, a government may rise its
spending in a bid to increase aggregate demand
and the output of the economy. In contrast, if
there is a high inflation rate the government
may reduce its spending.
A desire to please voters – Pressure can be put
on a government by people to spend money on
services such as improving the NHS, education
or the transport infrastructure. Before a general
election, the government may increase their
spending to win around the public and increase
political support.
War, terrorist attacks and rising crime, or their
threat, can also increase government
spending.
 Infrastructure
– The basic physical and
organisational structures and facilities (eg.
Roads and buildings) needed for the
operation of a society.
 Unemployment – A situation where people
are out of work but willing and able to work.
 Inflation – A sustained rise in the price level
over a period of time.
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How many ways of government spending
can you remember? List them
How does a government election effect
government spending at that time?
What are the main factors considered when
the government decide what to spend
money on?
What do you think is the focus point of
government spending in the past year?
Thank you for watching!
http://www.guardian.co.uk/news/datablog/2012/m
ar/21/budget-2012-spending-tax-visualised#zoomedpicture