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Economics 4.5.1
Economics- Edexcel 4.5.1
| Term | Definition |
|---|---|
| 2 parts of government spending | money is spent on an asset that lasts several years(capital spending) or used up (resource or current spending) |
| How can government spending affect household incomes | welfare state transfers & state-provided services |
| Welfare state transfers | universal child benefits, public pensions, targeted welfare payments |
| State-provided services | education, health care, social housing, employment training |
| Justifications for government spending | provide public goods/overcome market failures/provide safety-net system of welfare benefits/infrastructure/manage AD/promote equity/improve economic efficiency & competitiveness |
| Free market economists opinion on government | argue that lower taxation and tight control of gov spending and borrowing is required to allow private sector to flourish |
| Crowding out | a rapid growth of government spending leads to a transfer of scarce productive resources from the private sector to the public sector where productivity might be lower, leading to higher taxes and interest rates |
| Crowding in | an increase in gov spending/investment leads to an expansion of economic activity which incentivises private sector businesses to raise their own levels of capital investment and employment |
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jessharris
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