Question

Spending and Revenue are divided into ten categories, such as Investments, General Government, etc. Choose three spending categories and one revenue category to write about.

Answer 1

Spending categories:

1. Personal consumption expenditure- This is the expenditure that is made by the households on the consumption of the goods produced in an economy in order to meet their demand. This includes both the durable and non-durable goods. In the United States, the largest contributor on this part of the expedniture is by spendings on services.

2. Investment spending- This includes the investments spending made by the firms on the purchase of capital and also the residential investment made by the people in an economy. This depends on the interest rate prevailing in the economy, as the higher interest rates means the higher costs which makes it less profitable to invest.

3. Government expenditure- This is the expenditure made by the government on both the developmental and the non-developmental part. This includes the provisions made by the government for the welfare of people such as pension benefits, unemployment benefits etc, plus it also includes those expenditures which the government makes to pay interest on loans, defence etc.

Revenue :

1. Government revenue- The main revenue generation for the government is from the taxes it collects from the people. It is an import component of the fiscal policy of the government. the revenue collected by the government decides the major decisions which the government will make in the next period about the spendings.