ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Government spending reduces savings in the economy, thus increasing interest rates. This can lead to less investment in areas such as home building and productive capacity, which includes the facilities and infrastructure used to contribute to the economy’s output.

Detailed explanation-2: -The most obvious way the government is involved in the U.S. economy is providing public goods and services like education, military protection, national parks and federal highways. These goods and services are paid for with tax revenue, which introduces a second role of government – redistribution of income.

Detailed explanation-3: -In response to the financial slowdown and its impact on the economy, the government plays a key role by increasing its spending in order to boost economic growth.

Detailed explanation-4: -When the government innovates more and more methods of taxation and resource mobilisation, its ability to finance public expenditure increases and the size of public expenditure grows. Public sector outlays could be increased by more taxation yields, public debt, foreign aid and deficit financing.