Impact of Government Spending
Government spending influences the distribution of income, resource allocation and private sectors. Since the size of the public sector is huge, it can effects people's daily lives through the list above. Government spending decisions directly affect how resources are allocated. If the government spends its revenue on projects such as missile systems in rural areas rather than on social welfare programs in urban areas, economic activity is stimulated in rural areas as resources are shifted there. They may also be affected indirectly as well.
Government spending also influences the distribution of income, or the way in which income is allocated among families, individuals, or designated groups in the economy. A great example of distribution of income is when the government increases or decreases transfer payments. This especially affects the needy families supported by the government.
When the government produces goods and services, it often compete with private sector. A way to make you understand this concept a little better is this idea. Many public colleges and universities compete with more expensive private colleges. That is exactly how the government competes with the private sector. Here is a video that will explain the difference between a private sector job and a government job.
Government spending also influences the distribution of income, or the way in which income is allocated among families, individuals, or designated groups in the economy. A great example of distribution of income is when the government increases or decreases transfer payments. This especially affects the needy families supported by the government.
When the government produces goods and services, it often compete with private sector. A way to make you understand this concept a little better is this idea. Many public colleges and universities compete with more expensive private colleges. That is exactly how the government competes with the private sector. Here is a video that will explain the difference between a private sector job and a government job.