4.5.1 & 4.5.3 Public Expenditure

Spending on day-to-day  government activities e.g. teachers’ salaries, the cost of running schools, NHS staff… is referred to as

• Capital Expenditure

• Current Expenditure

• Transfer payments

• Financial Transactions

Government spending for which there is no corresponding   output e.g. pensions, child benefit and unemployment benefit is referred to as

• Capital Expenditure

• Current Expenditure

• Transfer payments

• Financial Transactions

Spending on buildings, machinery, vehicles, etc. (also known as Fixed Capital Formation) is referred to as

• Capital Expenditure

• Current Expenditure

• Transfer payments

• Financial Transactions

Financial transactions carried out by the government e.g. buying shares, lending money to business and other countries… is referred to as

• Capital Expenditure

• Current Expenditure

• Transfer payments

• Financial Transactions

Total Managed Expenditure (TME) is expected to be around £1,335 billion in 2025-2026.

Public sector current receipts are expected to be about £1,229 billion in 2025-2026. Therefore there is a planned deficit of £___bn

• 106

• 116

• 126

• 96

Which of the following is NOT a reason for the change in the size and composition of public expenditure in the UK?

• Demographics

• Technological change

• Crises

• Falling demands from citizens

Which of the following is NOT an effect of crowding out?

• Rising interest rates

• Less private sector investment

• Higher government spending

• Greater economic efficiency

Which of the following statements is true regarding automatic stabilisers?

• They can work to stop the economy overheating too much or sliding into a severe recession.

• They may not partially offset fluctuations in the level of National Income.

• They require direct government intervention.

• They require governments to manipulate tax rates or expenditure levels through the annual Budget.

Which of the following is NOT true regarding budget deficits?

• If annual government spending (G) is greater than annual government revenue (T) it will have to borrow more.

• Annual borrowing is also known as Public Sector Net Borrowing (PSNB)

• It is a flow measure

• Annual borrowing is also known as Public Sector Net Debt (PSND)

The National Debt is ...

• annual government borrowing

• the accumulated annual government borrowings

• the amount of debt owed by households

• the amount of debt owed by government, firms and households