Answer:
Explanation:
Government spends money for a variety of reasons, including:
To supply goods and services that the private sector would fail to do, such as public goods, including defense, roads and bridges; merit goods, such as hospitals and schools; and welfare payments and benefits, including unemployment and disability benefit.
To achieve supply-side improvements in the macro-economy, such as spending on education and training to improve labor productivity.
To reduce the negative effects of externalities, such as pollution controls.
To subsidise industries which may need financial support, and which is not available from the private sector. For example, transport infrastructure projects are unlikely to attract private finance, unless the public sector provides some of the high-risk finance, as in the case of the UKs Private Finance Initiative – PFI. During 2009, the UK government provided huge subsidies to the UK banking sector to help deal with the financial crisis. Agriculture is also an industry which receives large government subsidies. See: CAP.
To help redistribute income and achieve more equity.
To inject extra spending into the macro-economy, to help achieve increases in aggregate demand and economic activity. Such a stimulus is part of discretionary fiscal policy.
Local government is extremely important in terms of the administration of spending. For example, spending on the NHS and on education are administered locally, though local authorities. Approximately 75% of all public spending is by central government, and 25% is by local government
