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Government Spending and Economic Growth

Question

Discuss whether or not increased government spending will increase economic growth.

Category:

Public Finance and Government Intervention

Frequently asked question

Preview Answer

I. 🍃Introduction
- Brief explanation of the topic
- Purpose of the outline

II. Reasons why higher government spending might increase economic growth
- Higher government spending will increase total demand
- Higher government spending on education/training and health may raise labour productivity
- Higher government spending on infrastructure will reduce costs of production
- Higher government spending on R&D would lower costs/raise productive potential

III. Reasons why higher government spending might not increase economic growth
- Higher government spending may increase inflation
- Higher government spending may not increase total demand if offset by lower consumer expenditure
- Higher government spending may not increase total demand if it is accompanied by higher taxation
- Higher government spending on education/training may not increase labour productivity if it does not raise the quality of education/training
- Higher benefits may reduce incentives to work
- Government spending may be spent wastefully/inefficiently

IV. 👉Conclusion
- Summary of the main points
- Final thoughts on the topic

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