Answer to Question #131421 in Macroeconomics for precious

Question

3.1. Government spending (as a percentage of gross domestic expenditure) has
increased significantly over the past decades. Explain any two reasons for this
trend. (6)

3.2. The increased government spending noted in Q.3.1. above has to be financed in
one way or another.
Describe three ways in which government spending can be financed (9)

Answer 1

3.1. The two possible reasons for this

trend are: the increased investment in some infrastructure or public projects or increase in defece expenditure.

3.2. The increased government spending noted in Q.3.1. above has to be financed using tax revenues, government borrowings (bonds, Treasury Bills etc.), or some foreign investment.