Fiscal policy: Framework

Overview

Recall questions on Framework.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is the government's budget?

   Model answer

   The budget is the government's annual statement of its planned expenditure and its expected revenue, setting out how any gap between the two will be financed.

2. 2

   Name three of the largest areas of UK government expenditure.

   Model answer

   Social protection (welfare payments and state pensions), health, and education.

3. 3

   Name the three largest sources of UK government revenue.

   Model answer

   Income tax, national insurance contributions and value added tax.

4. 4

   What is current expenditure?

   Model answer

   Current expenditure is day-to-day spending on running public services, such as public sector wages, medicines and the maintenance of existing buildings.

5. 5

   What is capital expenditure?

   Model answer

   Capital expenditure is spending on long-lived assets that add to the economy's stock of infrastructure and productive capacity, such as new roads, railways, hospitals and schools.

6. 6

   Why do economists usually regard capital expenditure more favourably than current expenditure?

   Model answer

   Capital expenditure raises the economy's productive capacity and can generate future output and tax revenue that help service the borrowing used to fund it, whereas current spending is consumed immediately.

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