4.5 Role of State in Macro Economy

What is current government expenditure primarily spent on?

• Long-term investments

• Assets that can be used multiple times

• Goods and services that are consumed and last for a short period

• Welfare payments to the public

What does capital government expenditure typically involve?

• Recurring spending on goods and services

• Spending on assets that can be used multiple times

• Welfare payments to the public

• Payments for health services

What are transfer payments?

• Payments for goods and services

• Investments in long-term assets

• Welfare payments from the government to provide a minimum standard of living

• Government spending on education

Which area of public expenditure is the UK government spending the least on?

• Pensions and welfare benefits

• Health and education

• Defence

• Social security payments

What has been the trend in education spending in the UK?

• It has increased significantly

• It has decreased significantly

• It has remained relatively constant

• It is the area where the government spends the most

What effect did the Global Financial Crisis have on government spending?

• It led to a decrease in government spending

• It caused a reduction in welfare spending

• It resulted in increased government spending and bailouts for banks

• It had no significant impact on government spending

What demographic change is likely to put more pressure on government spending?

• Decreasing populations in Europe and Japan

• Ageing populations in Europe and Japan

• Increasing birth rates in Europe and Japan

• Decreased levels of care needed in Europe and Japan

What is the role of government spending in improving human capital and long-run growth according to the text?

• Government spending has no significant impact on human capital and long-run growth.

• Government spending on supply-side policies can improve human capital and boost long-run growth.

• Government spending should only focus on short-term growth and not on human capital.

• Government spending on human capital is considered wasteful by all economists.

What do many free market economists believe about government spending?

• It is essential for economic growth and efficiency.

• It prevents growth by causing inefficiency.

• It is the only way to ensure the provision of public goods.

• It always improves living standards without any negative consequences.

How can government spending improve living standards?

• By increasing taxes and reducing public spending.

• By spending where people want and correcting market failure.

• By borrowing money and increasing interest rates.

• By preventing any form of public goods provision.