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The impact of government spending on economic growth in South Africa…
The impact of government spending on economic growth in South Africa
Fiscal policy is the best policy to use for economic growth
Expansionary policy allows the society to spend and contribute to the economy due to an increase in government spending and a reduction in taxes
Contractionary policy where taxes are increased and government spending is reduced,negative contribution to the economy as people are taxed higher and refrain from spending
Economic growth can also be explored through supply and demand mechanism
Increase in government spending will cause inflation
The is a negative correlation between inflation and growth,the regression model shows the inverse relationship
Only in the short run will the spending by government will bring a positive impact in economic growth
We take note of the multiplier effect of which will be more than one
If the tax system is inefficient,nominal interest rates increase larger for a given increase in government spending
The results of larger spending induces inflation
Government leads to an increase in employment
Jobs are created through building of roads,healthcare,public school to mention a few
People get jobs and earn income
employment is positively correlated with government spending
The result of an increase in government spending during recession or when the economy is in full capacity
The larger the government spends results in crowding out,and individuals spend less during recession
In full capacity it causes inflation and it spending by the government is financed by higher taxes which equates aggregate demand not increasing
Expenditure by the government boost the economy to recover from bad state during recession
Government is needed and it funds infrastructure
There are different areas where government finance its spending on
pure public goods excludes other individuals from using those goods
It increases future productivity
Taxes are raised for government spending and increase in taxes leads to less spending by society at large an further less contribution to the economy
Negative side of it when contractionary fiscal policy is implemented