Government Spending - Edexcel Unit 4

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Harry Bindloss
GOVERNMENT SPENDING
Ways to Finance Government Spending:
1. Public Sector borrowing ­ The government will make interest from the banks that are
lending out money. The amount the UK has to borrow when expenditure is more than
incomes from other countries, private banks, private companies etc. are all paid with
interest.
2. Interest payments on loans ­ Rate of interest paid back when government extends a
loan.
3. Rent from public-owned land and buildings
4. Gross operating surpluses from executive agencies
5. Proceeds from the sale and transfer of government owned industries ­ Selling
off things to private companies. Anything with British in it was once owned by the
government e.g. British Airways etc.
6. Money paid into the national lottery
7. Taxation ­ two different taxes: Direct and Indirect
The Size and Pattern of Government Spending
Political Priorities ­ Budget deficit/Education/Health Care
The size and age distribution of the population ­ If the population is increasing they
have to work out how much to spend. Age ­ Old people need pensions, Young people need
student loans.
Size of current GDP ­ Looks at growth. Can mean that increased disposable incomes mean
better living standards
Redistribution of income ­ The extent at which "relative poverty" is actually a problem
Fiscal Policy ­ Need to decide whether to do an expansionary or contractionary policy
Debt interest ­ Need to consider how much they are going to need to pay back. Would
depend on their credit rating
ANALYSIS

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Harry Bindloss
Opportunity Cost ­ If you spend anything it's at the expense of something else and it
could have been spent on something else.
Education and Health Care ­ YES elastic ­ If income increases you will get better
education and health care.…read more

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