A report on Government spending

The Market for Capital (the Loanable Funds Market) and the Crowding Out Effect. An increase in government deficit spending "crowds out" private investment by increasing interest rates and lowering the quantity of capital available to the private sector.
Tax Burden as a Percentage of GDP (2014 Index of Economic Freedom).
Government spending as percentage of GDP in different countries, 1890 to 2011
Government Expenditure as a Percentage of GDP (2014 Index of Economic Freedom).

Government spending or expenditure includes all government consumption, investment, and transfer payments.

- Government spending
The Market for Capital (the Loanable Funds Market) and the Crowding Out Effect. An increase in government deficit spending "crowds out" private investment by increasing interest rates and lowering the quantity of capital available to the private sector.

9 related topics with Alpha

Overall
The IS curve shifts to the right, increasing real interest rates (r) and expansion in the "real" economy (real GDP, or Y).

Fiscal policy

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The IS curve shifts to the right, increasing real interest rates (r) and expansion in the "real" economy (real GDP, or Y).

In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy.

Total revenue from direct and indirect taxes given as share of GDP in 2017

Tax

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Total revenue from direct and indirect taxes given as share of GDP in 2017
Pieter Brueghel the Younger, The tax collector's office, 1640
Substitution effect and income effect with a taxation on y good.
Budget's constraint shift after an introduction of a lump sum tax or a general tax on consumption or a proportional income tax.
The Laffer curve. In this case, the critical point is at a tax rate of 70%. Revenue increases until this peak, then it starts decreasing.
General government revenue, in % of GDP, from social contributions. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 20% by social contributions revenue.
Egyptian peasants seized for non-payment of taxes. (Pyramid Age)
Public finance revenue from taxes in % of GDP. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 32% by tax revenue.
Diagram illustrating deadweight costs of taxes

A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national), and tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.

The IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).

Crowding out (economics)

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Phenomenon that occurs when increased government involvement in a sector of the market economy substantially affects the remainder of the market, either on the supply or demand side of the market.

Phenomenon that occurs when increased government involvement in a sector of the market economy substantially affects the remainder of the market, either on the supply or demand side of the market.

The IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).

If an increase in government spending and/or a decrease in tax revenues leads to a deficit that is financed by increased borrowing, then the borrowing can increase interest rates, leading to a reduction in private investment.

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Recession

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Business cycle contraction when there is a general decline in economic activity.

Business cycle contraction when there is a general decline in economic activity.

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Monetarists would favor the use of expansionary monetary policy, while Keynesian economists may advocate increased government spending to spark economic growth.

Circulation in macroeconomics.

Macroeconomics

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Branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole.

Branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole.

Circulation in macroeconomics.
A traditional AS–AD diagram showing a shift in AD and the AS curve becoming inelastic beyond potential output.
In this example of an IS/LM chart, the IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).
Natural resources flow through the economy and end up as waste and pollution
A chart using US data showing the relationship between economic growth and unemployment expressed by Okun's law. The relationship demonstrates cyclical unemployment. Economic growth leads to a lower unemployment rate.
Changes in the ten-year moving averages of price level and growth in money supply (using the measure of M2, the supply of hard currency and money held in most types of bank accounts) in the US from 1880 to 2016. Over the long run, the two series show a close relationship.
An example of intervention strategy under different conditions

Examples of such tools are expenditure, taxes, debt.

A map of world economies by size of GDP (nominal) in USD, World Bank, 2014.

Gross domestic product

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Monetary measure of the market value of all the final goods and services produced in a specific time period by countries.

Monetary measure of the market value of all the final goods and services produced in a specific time period by countries.

A map of world economies by size of GDP (nominal) in USD, World Bank, 2014.
Quarterly gross domestic product
An infographic explaining how GDP is calculated in the UK
U.S. GDP computed on the expenditure basis.
Countries by GDP (PPP) per capita (Int$) in 2017 according to the IMF
U.S 2015 GDP computed on the income basis
Shown is how the global material footprint and global CO2 emissions from fossil-fuel combustion and industrial processes changed compared with global GDP.

G (government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchases of weapons for the military and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. Analyses outside the USA will often treat government investment as part of investment rather than government spending.

Measures of national income and output

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A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI adjusted for natural resource depletion – also called as NNI at factor cost).

A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI adjusted for natural resource depletion – also called as NNI at factor cost).

G = Government spending (Government consumption / Gross investment expenditures)

Illustration of the saving identity with the three sectors, the computation of the surplus or deficit balances for each and the flows between them

Modern Monetary Theory

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Heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.

Heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.

Illustration of the saving identity with the three sectors, the computation of the surplus or deficit balances for each and the flows between them
The Federal Reserve raising the Federal Funds Rate above U.S. Treasury interest rates creates an inverted yield curve, which predicts recessions.

In MMT, "vertical money" enters circulation through government spending.

San Francisco Ferry Building at night

Infrastructure

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Set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function.

Set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function.

San Francisco Ferry Building at night
Lehigh Valley Hospital in Allentown, Pennsylvania
An Autobahn in Lehrte, near Hanover, Germany

Some sectors are dominated by government spending, others by overseas development aid (ODA), and yet others by private investors.