Government Expenditure - Theories

Government expenditure has a significant impact on the economy in a variety of ways and so in this section we will look at relevant theories about how it affects the economy and individuals. The theories considered are:

• T1 Transfer payments - who transfers what to whom?
• T2 Public goods and merit goods - what are they and who gets them?
• T3 Current spending vs. capital spending - does it matter what the money is spent on?
• T4 Automatic spending vs. discretionary spending - who is really in control of spending?
• T5 The multiplier - £10bn expenditure = £20bn income?