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Government Spending and Surplus on Current Account

Question

Discuss whether or not an increase in government spending will reduce a surplus on the current account of the country’s balance of payments.

Category:

Macroeconomic Factors and Policies

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Preview Answer

I. 🍃Introduction
A. Definition of government spending
B. Importance of government spending in the economy
C. Purpose of the essay

II. Reasons why higher government spending may lead to an increase in imports
A. Example of imported computers for government offices
B. Increase in disposable income due to state benefits
C. Increase in total demand leading to inflation
D. Reduction in international competitiveness
E. Increase in imports

III. Reasons why higher government spending may not lead to an increase in imports
A. Government spending on education and training
B. Government spending on healthcare
C. Government spending on infrastructure
D. Subsidies for domestic products

IV. Impact of government spending on exports
A. Increase in exports due to improved quality and productivity
B. Reduction in imports due to lower transport costs
C. Lowering the price of domestic products through subsidies

V. 👉Conclusion
A. Summary of the main points
B. Importance of government spending in promoting economic growth
C. Future implications and recommendations.

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