Answer to Question #150383 in Microeconomics for Muhammed Tariq

Question

To what extent can higher levels of government spending increase living standards? Refer to a developing country of your choice. (25 marks)

Answer 1

Some of the countries that have smaller government sector appreciate faster productivity growth thus raising the living standards. Government spending on capital items can improve competitiveness and promote economic growth. Through that, the infrastructure of the country is developed. United States has a government spending around 35% of Gross Domestic Product (GDP). Government spending also brings about reduction on interest rates if the spending is on healthcare and education. Economic objectives such as action against poverty and reducing unemployment through government spending.