Answer to Question #131338 in Microeconomics for imelda

Question

government spending as a percentage of gross domestic expenditure has increased significantly over the past decade. explain any two reasons for this trend

Answer 1

Answer

1. Increased government spending may be as a result of increased investment by the government in provision of infrastructure, public goods and facilities such as in health and education. This may be a deliberate move by the government to improve the welfare and standards of living of the people. Increased investment in projects such as modern road and railway networks, may also be seen as a catalyst for economic growth by opening up new opportunities.
2. Government spending may be increased to stimulate the economy during recession. It is expected that through increased government spending, money is moved into citizen's hands stimulating demand for goods and services. However, this often leads to economic growth in short term.