Government consumptions, investments, and transfer payments
"Public Purse" and "Public money" redirect here. For the term used in relation to the British monarchy, see Privy Purse. For the academic journal formerly called Public Money, see Public Money & Management.
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Government spending or expenditure includes all government consumption, investment, and transfer payments.[1][2] In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment (government gross capital formation). These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product.
Spending by a government that issues its own currency is nominally self-financing.[3] However, under a full employment assumption, to acquire resources produced by its population without potential inflationary pressures, removal of purchasing power must occur via government borrowing, taxes, custom duties, the sale or lease of natural resources, and various fees like national park entry fees or licensing fees.[4] When these sovereign governments choose to temporarily remove spent money by issuing securities in its place, they pay interest on the money borrowed.[5] Changes in government spending are a major component of fiscal policy used to stabilize the macroeconomic business cycle.
Public expenditure is spending made by the government of a country on collective or individual needs and wants of public goods and public services, such as pension, healthcare, security, education subsidies, emergency services, infrastructure, etc.[6] Until the 19th century, public expenditure was limited due to laissez faire philosophies. In the 20th century, John Maynard Keynes argued that the role of public expenditure was pivotal in determining levels of income and distribution in the economy. Public expenditure plays an important role in the economy as it establishes fiscal policy and provides public goods and services for households and firms.
^"Government | U.S. Bureau of Economic Analysis (BEA)". Archived from the original on 26 August 2018. Retrieved 9 November 2020.
^Robert Barro and Vittorio Grilli (1994), European Macroeconomics, Ch. 15–16. Macmillan, ISBN 0-333-57764-7.
^Berkeley, Andrew; et al. (24 May 2022). "The self-financing state: An institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom". University of College London. Retrieved 22 April 2024.
^"Sources of Federal Government Revenue | U.S. Treasury Data Lab". datalab.usaspending.gov. Archived from the original on 3 August 2021. Retrieved 3 August 2021.
^"Borrowing and the Federal Debt". Archived from the original on 15 May 2012. Retrieved 8 November 2020.
^Akrani, Gaurav. "Meaning of Public Expenditure". Retrieved 15 February 2012.
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