Budget Question. Help ! (1 Viewer)

[Justin123456789]

this question in my assignment says, identify the actuall effects of the budget of each sector of the circular flow of income.

i am up to government and i am confused as to what the effects are, as i managed to do the other 4 but i dont get how the governemnt would be affected.

please help

 

[bling05]

Possibly mention the crowding out effect, not too sure.

 

[seano77]

Votes: if they spend more, they get more votes but if they spend too much they rise inflation and get less votes. Also, they can be seen to favour high or low income earners depending on their spending behaviour. This also applies to their stance on environmental issues or public goods. Also, if they budget outcome is a deficit they must decide how to fund it and how costly this will be.

 

[conics2008]

guys this si the circular flow of income

if you look at it, look at the taxes, the invesements and the income distribution.

this is what the governmetn use it for.

 

[BackCountrySnow]

kks.

For the public sector - taxes are the leakages and total government expenditure are the injections.

The budget is the planned expenditure over the financial year. So an increased surplus which is what is planned, will have a contractionary effect on the circular flow of income since leakages>injections. Of course assuming ceteris paribus.

EDIT: i miss year 11