Government Spending
Government spending (G) includes expenditure on goods and services (NHS, education, defence), investment (infrastructure), and transfer payments (pensions, welfare). Government spending is roughly 40% of UK GDP. It is determined by political decisions rather than market forces.
Real World
The UK government's HS2 rail project, originally budgeted at £37.5 billion, represents direct government investment that injects spending into construction firms across the Midlands and North, directly increasing AD.
Exam Focus
Distinguish transfer payments (redistribute income, indirect AD effect) from government purchases (direct AD injection) — a common mark-scheme distinction.
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