KK10 - Types of Government Expenses, including current and capital expenditure and transfer payments

Question 1

Types of Government expenses

Answer 1

Budget Expenses are directed to the provision of particular goods and services, as well as social security/welfare outlets, healthcare, education, and public debt interest,

Question 2

Types of Government expenses - Social security/welfare outlets

Answer 2

-Government payments to the neediest groups who meet a means and assets test

Question 3

Types of Government expenses - Public Debt interest

Answer 3

• The annual cost of the government paying interest on its accumulated debts or borrowings (when they must pay interest to holders of government bonds to finance deficit).

Question 4

Types of Government expenses - Note

Answer 4

Healthcare and education are relatively self-explanatory

Question 5

Classifying Government Expenses - G1 (part of G in AD equation)

Answer 5

Government current (consumption) expenditure
-Refers to paying for goods and services necessary to run current government (e.g., salaries, rent, stationary)

Question 6

Classifying Government Expenses - G2 (part of G in AD equation)

Answer 6

Government investment (or capital) payments
-Refers to goods of a capital nature (e.g., building of schools, unis, roads)
-Helps boost productive capacity

Question 7

Government Transfer Payments (the C in AD equation)

Answer 7

These involve budget outlays like:
-Social security payments
-Grants
-Industry Assistance

Are aimed to redistribute final incomes more equitably