Answer to Question #213237 in Finance for Ompha

Question

Critically discuss any three Macroeconomic and at least two Microeconomic reasons for growth in government expenditure.   

Answer 1

Three Macroeconomic

high population: governments tend to increase their spending to cater to increased demand for social services caused by the high population.

Inflation: high prices increase government spending when purchasing goods and services.

Public debt: government increases the spending for repayment of the debt.

Two Microeconomic

low-interest rates and tax cuts. Borrowing becomes cheaper when interest rates are low triggering, tax cuts make the increased individual expenditure. This triggers increased government spending to meet the public demands in the public sector.