Budget primer: Understanding govt expenditure and its various types

Its importance is seen in its ability to hugely influence the nation's economy, as it reflects aggregate demand in addition to household consumption, business investment, and net exports

Government expenditure is the central government's spending on goods and services and other items

It has a huge influence on the nation’s economy as it reflects aggregate demand in addition to household consumption, business investment, and net exports.

Therefore, when government expenditure increases, aggregate demand increases, and the economy is expected to grow. On the other hand, when the government cuts its spending, aggregate demand declines and so does the economy of a nation.

Revenue expenditure

The expenditure that the government incurs for purposes other than the creation of physical or financial assets is known as revenue expenditure.

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