Government spending

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.

Government spending can be financed by government borrowing, taxes, custom duties, the sale or lease of natural resources, and various fees like national park entry fees or licensing fees.[3] When Governments choose to borrow money, they have to pay interest on the money borrowed.[4] Changes in government spending is a major component of fiscal policy used to stabilize the macroeconomic business cycle.


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