Government Spending and National Debt

The video tutorial explains the role of government spending in the aggregate demand equation and its influence on economic activity. It covers different types of government spending, including current, capital, and welfare spending, and discusses the impact of debt interest payments. Key terms such as budget deficit, budget surplus, and national debt are defined, highlighting their differences. The video concludes with a brief mention of the next topic, determinants of net exports.

What is a key component of the aggregate demand equation?

• Government spending

• Consumer savings

• Private investment

• Foreign exchange

Which type of government spending involves the maintenance of public sector services?

• Capital spending

• Current spending

• Welfare spending

• Debt interest payments

What is considered the largest portion of government spending in the UK?

• Debt interest payments

• Welfare spending

• Capital spending

• Current spending

Which of the following is NOT an injection into the circular flow of an economy?

• Capital spending

• Debt interest payments

• Current spending

• Welfare spending

What is the opportunity cost of debt interest payments in the UK?

• Higher national debt

• Reduced public services

• Lower capital spending

• Increased taxation

What does a budget deficit indicate?

• Government spending is unrelated to tax revenues

• Government spending exceeds tax revenues

• Government spending equals tax revenues

• Government spending is less than tax revenues

How is national debt different from a budget deficit?

• It is unrelated to government spending

• It is calculated annually

• It is a stock concept

• It is a flow concept

What happens to the national debt when a country runs a budget surplus?

• It remains the same

• It becomes irrelevant

• It decreases

• It increases

What is the fiscal year period in the UK?

• July to June

• April to March

• October to September

• January to December

What is the result of five years of budget deficits?

• Balanced budget

• Increased national debt

• Decreased national debt

• No impact on national debt