Source: ONS MF6U UK government spending passed over £1 trillion in 2020 due to the extra spending measures of the Covid Pandemic. Total spending compared to Nominal GDP Source: HMT public spending statistics (May 2022) The rise in spending 2020-21, also combined with a fall in GDP UK Public spending as % of GDP Source: …
Countries with the highest government spending as a share of GDP. The countries with the highest levels of government spending as % of GDP are predominantly Western Europe and Scandinavia in particular. The countries with the lowest government spending as a % of GDP tend to be poor developing economies. The one notable exception is …
Readers Question: Discuss the impact of a decrease in government spending? If the UK government cut government spending, it would have a significant impact on both aggregate demand (AD) and the supply side of the economy – depending on which areas of public spending were cut. Firstly, government spending (G) is a component of Aggregate …
Increased government spending is likely to cause a rise in aggregate demand (AD). This can lead to higher growth in the short-term. It can also potentially lead to inflation. Higher government spending will also have an impact on the supply-side of the economy – depending on which area of government spending is increased. If spending …
Readers Question: Does the Rahn Curve support the empirical evidence? If not, why not? Can you prove that there is a relationship between the level of Government Spending and GDP growth? The Rahn Curve suggests that there is an optimal level of government spending which maximises the rate of economic growth. Initially, higher government spending …
During the years 1997-2007, there was a significant rise in government spending, though as a % of GDP the rise was less marked. Source: ONS Public Sector Finances MF6U – October 2014 Government spending as a % of GDP A more meaningful comparison is to look at the share of government spending as a % …
Readers Question: Why are there government spending cuts at a time of rising government spending? One of the confusing elements of ‘austerity’ and government spending cuts is that from one perspective, we can have a rise in total government spending – but some areas of government spending see cuts. Source: ONS Public Sector Finances MF6U …
Firstly, I thought it might be helpful to talk about the different types of spending cuts that people refer to. An actual cut in government spending. e.g. one year we spend £39bn on defence, the next year that is cut to £38 bn. This is a nominal cut of £1bn. The real cut will be …