Worksheets4.5.1 & 4.5.3 Public Expenditure
Total questions: 16
Worksheet time: 8mins
Spending on day-to-day government activities e.g. teachers’ salaries, the cost of running schools, NHS staff… is referred to as
Capital Expenditure
Current Expenditure
Transfer payments
Financial Transactions
Government spending for which there is no corresponding output e.g. pensions, child benefit and unemployment benefit is referred to as
Capital Expenditure
Current Expenditure
Transfer payments
Financial Transactions
Spending on buildings, machinery, vehicles, etc. (also known as Fixed Capital Formation) is referred to as
Capital Expenditure
Current Expenditure
Transfer payments
Financial Transactions
Transactions carried out by the government such as buying shares, lending money to business and other countries… is referred to as
Capital Expenditure
Current Expenditure
Transfer payments
Financial Transactions
Total Managed Expenditure (TME) is expected to be around £1,335 billion in 2025-2026.
Public sector current receipts are expected to be about £1,229 billion in 2025-2026. Therefore there is a planned deficit of £___bn
106
116
126
96
Which of the following is NOT a reason for the change in the size and composition of public expenditure in the UK?
Demographics
Technological change
Crises
Falling demands from citizens
Which of the following is NOT an effect of crowding out?
Rising interest rates
Less private sector investment
Higher government spending
Greater economic efficiency
Which of the following statements is true regarding automatic stabilisers?
They can work to stop the economy overheating too much or sliding into a severe recession.
They may not partially offset fluctuations in the level of National Income.
They require direct government intervention.
They require governments to manipulate tax rates or expenditure levels through the annual Budget.
Which of the following is NOT true regarding budget deficits?
If annual government spending (G) is greater than annual government revenue (T) it will have to borrow more.
Annual borrowing is also known as Public Sector Net Borrowing (PSNB)
It is a flow measure
Annual borrowing is also known as Public Sector Net Debt (PSND)
The National Debt is ...
annual government borrowing
the accumulated annual government borrowings
the amount of debt owed by households
the amount of debt owed by government, firms and households
True or false? If annual borrowing falls from £180bn to £150bn, both the annual deficit (PSNB) and the National Debt (PSND) will be lower.
True
False
Which of the following is NOT true regarding a structural deficit?
A structural deficit occurs due to the change and composition of the economy
A structural deficit is the part of the deficit that remains even when the economy is operating at full capacity.
Structural deficits arise from the fluctuations in economic growth resulting from the business cycle.
A structural deficit is the underlying deficit that is not directly affected by economic performance.
Which of the following regarding cyclical deficits is NOT true?
A cyclical deficit occurs due to the fluctuations in economic growth resulting from the business cycle.
In a recession, tax revenues rise and spending on unemployment benefits falls leading to a rise in cyclical deficits.
In a recession, tax revenues fall and spending on unemployment benefits rises leading to a rise in cyclical deficits.
True or false? An ageing population will reduce an economy's structural deficit?
True
False
All of the following statements regarding fiscal deficits are true EXCEPT...
Higher fiscal deficits lead to higher interest repayments (debt servicing) leading to an opportunity cost.
Higher taxation in the longer run can affect intergenerational equity i.e. future generations will be paying for overspending of previous generations.
More borrowing affects a country’s credit rating and its ability to borrow in the future.
Higher government borrowing can stimulate AD and lead to higher inflation.
True or False? Andrew Bailey, The Governor of The Bank of England, has an annual salary of £495 000 and he has declined pay increases since his appointment in March 2020.
True
False
