5.Government Budget and the Economy
The chapter focuses on the government budget, exploring its components such as revenue and capital receipts, objectives of government expenditure, and classifications of expenditure. It discusses balanced, surplus, and deficit budgets, including their implications on the economy. The role of fiscal policy, the concepts of public goods, and the significance of debt in government finances are emphasized throughout.
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What we have learnt
- The government budget is crucial for outlining the fiscal framework and plays a significant role in managing the economy.
- Public goods necessitate government provision due to their non-rivalrous and non-excludable characteristics.
- Understanding the relationship between revenue deficits, fiscal deficits, and capital expenditures is essential for evaluating the health of public finances.
Key Concepts
- -- Public Goods
- Goods that are non-rivalrous and non-excludable, meaning they can be consumed simultaneously by many individuals without reducing availability for others, necessitating government provision.
- -- Fiscal Deficit
- The difference between the government's total expenditure and its total revenue, excluding borrowing, indicating the borrowing requirements of the government.
- -- Government Expenditure Multiplier
- The factor by which government spending increases aggregate income in the economy, showing the relationship between fiscal policy changes and their economic impacts.
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