Question

1- Why is government spending an important factor in economic stability?

2- Create an excel document that shows the year and cars you have bought in the past. For example:

2012 - Honda Civic

Have you ever considered how frequently you buy cars? From this example, what is the average number of years (months) I take to replace a car? Any other interesting trend you see here?

Any other example where you could use Excel for?

Answer 1

1.

Government spending plays an important role in the economic growth of a country. It is also one of the most discussed topic in economics as economists differ on the impact of government spending to boost growth. But many governments do set their own spending budget & limits to respond to economic situations. Fiscal policy tools are an important aspect of government spending in times of recession or financial crisis. It determines the way in which government spends money & applies taxes. If economy is in recession government adopts expansionary fiscal policy in which it will decrease tax rates & increase its spending increasing money supply to boost economy & investment. If economy witnesses a fast paced growth government adopts restrictive monetary policy to decrease money supply in which it will raise taxes & cut its spending to control inflation & cool down economy.

Government spending is one of the most easily controlled aspect of aggregate demand. Government has flexibility to direct its spending towards specific sectors & projects where it’s needed more or sectors which need urgent financial assistance. Also the effects of fiscal policy yield results faster & remain longer than monetary policy.