Definition
- Government spending
- Government spending is the government's purchases of goods and services produced in the economy, which leaves out the pensions and benefits it pays.
Example
Can you think of an example of government spending?
The Ministry of Defence orders new ships, a council builds a primary school, and the state pays teachers' salaries. All three are purchases of goods and services, so all three count as government spending, G.
Test yourself
Can you name the four components of aggregate demand?