Public Expenditure, Taxation

and Budget

Public Expenditure

Government
expenditure

Government
Investment

Transfer
Payments

Government Expenditure is also known as

Current expenditure. This is used for day to
day functioning of the government.E.g
Salaries to government laborers

Government
Investments are
investments for
future purposes
such as in roads,
hospitals and
other
government
buildings

Transfer
payments are
expenses on
benefits
provided to the
unemployed,
sic and
pensioners

Public goods- Goods and services that

people would like to have but the market
system would not be able to give to the
people. E.g. law and order, defence

Merit goods- Goods and services that the

government feels all individuals should
have as a whole.E.g. Education, health and
services.

Social reasons- Benefits to the

unemployed,sick and pensioners for the
welfare of the state.

Controlling the economy- Fiscal

Policy(Taxation) to govern the economy
and for the welfare of the people
Overseas spending- Helping other
countries suffering from disasters like an
earthquake or draughts.

Public
Borrowing

Profit from
public
sector

How the government

raises money

Rent from
government
owned land
and building

Interest
payment
from loan
given by
government

Taxation

To raise
money for
government

To reduce
inequality

To protect the
environment

spending

Why does the

government
impose taxes

To restrict
consumption
of harmful
goods

To boost
employment
and control
inflation
To encourage
domestic
firms