Government spending
Definition. Government spending is the total expenditure by the government on goods, services, and transfers, and it is a component of aggregate demand and an injection into the circular flow of income. As an instrument of fiscal policy, changes in government spending are used to influence the level of economic activity.
It includes current spending on items such as wages and operating costs, and capital spending on infrastructure and investment, but excludes transfer payments when measuring aggregate demand.
This term belongs to Fiscal Policy in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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