ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The opportunity cost of government spending on a particular program is the foregone benefit of increased spending on another program. For public goods, the marginal benefit of government provision can exceed marginal cost. Marginal benefit does not exceed marginal cost for all goods and services provided publicly.

Detailed explanation-2: -The decrease in spending reduces aggregate demand for goods and services, slowing economic growth temporarily. Alternatively, when the government reduces spending, it reduces aggregate demand in the economy, which again temporarily slows economic growth.

Detailed explanation-3: -We classify productive government spending as the sum of expenditure on education, health, defence, housing, economic affairs and general public services expenditure, while non-productive expenditure consists of expenditure on public order and safety, recreation and social protection.

Detailed explanation-4: -Fiscal policy is a means to use government spending and taxation to influence the economic situation. It is different from the monetary policy that is under the control of the central bank in that country.