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Explain the main reasons for government spending

Boost aggregate demand. This is used to compensate for dramatic drops in consumption or investment in an economic crisis as these are both large and volatile components of AD, e.g. government stimulus programme for COVID-19. Can draw a diagram showing an increase in ADReduce inequalities. The market does not by itself redistribute wealth, leading to inequality. It is down to progressive schemes by the government for this to take placeTo correct market failure: provide public goods such as flood defencePromote merit goods and make people less inclined to pick demerit goods

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Explain the main reasons for government spending

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Explain the main reasons for government spending

Related Economics A Level answers

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