Role Of State

• What is the difference between capital expenditure and current expenditure?

  Capital expenditure is for assets; current is for goods.
• What is current government expenditure?

  Spending on goods and services consumed short-term.
• What is capital government expenditure?

  Spending on assets used multiple times.
• What are transfer payments?

  Welfare payments from the government with no exchange.
• What is the purpose of transfer payments?

  To provide a minimum standard of living.
• How do transfer payments help reduce inequality?

  They redistribute income from the rich to the poor.
• What does the UK government primarily spend its budget on?

  Pensions and welfare benefits.
• What is the biggest source of tax revenue in the UK?

  Income tax.
• Why has education spending in the UK remained constant?

  It is protected from cuts and increases.
• What are social security payments?

  Payments to assist those with low incomes.
• How did public expenditure change after the war?

  There was a general increase in spending.
• What is the trend in defence spending in the UK?

  Defence spending is falling.
• How can government spending impact productivity and growth?

  By funding supply-side policies to improve human capital.
• How does education and training affect productivity?

  It enables higher value products and improved productivity.
• What is the aim of fiscal policy?

  To stimulate economic growth and stabilize the economy.
• How can government influence the circular flow?

  By changing the government budget, spending, and taxes.
• What is crowding out in economic terms?

  Reduction in private sector investment due to government borrowing.
• How does government borrowing affect interest rates?

  It may lead to increased interest rates.
• What is the effect of crowding out on private sector investment?

  It discourages spending and investment.
• What does crowding out sometimes refer to?

  Government provision of goods instead of the private sector.
• How might high government debts affect tax rates?

  They may lead to increased tax rates.
• What is a proportional tax also known as?

  Flat tax
• How does a proportional tax affect taxpayers?

  It has a fixed rate for all taxpayers
• What is the effect of a proportional tax on income earning behavior?

  It may encourage higher income earning
• What happens if confidence in government debt repayment is lost?

  Governments may have to raise interest rates.
• What characterizes a progressive tax?

  Higher average tax rates with increased income
• What is the personal allowance in the UK for income tax?

  £10,600
• What tax rate do people pay for incomes below £31,785 in the UK?

  Basic rate of 20%
• What is the size of government spending as a proportion of GDP in the UK?

  About 40% of GDP.
• What tax rate applies to incomes between £31,786 and £150,000 in the UK?

  Higher rate of 40%
• What tax rate is applied to incomes above £150,000 in the UK?

  45%
• How does the UK's tax burden compare to Switzerland's?

  UK has a lower tax burden than Switzerland.
• How does a progressive tax help reduce inequality?

  Higher earners pay a larger proportion of tax
• What is a regressive tax?

  Higher average tax rate for lower incomes
• How can progressive taxes reduce inequality?

  They ensure the poorest pay less tax proportionally.
• What is the general characteristic of indirect taxes?

  They tend to be more regressive
• How do redistributive policies help low-income individuals?

  They provide welfare payments like Income Support.
• How does government spending on housing affect equality?

  It helps provide equal opportunities for all income backgrounds.
• What does the Laffer curve illustrate?

  Tax revenue at different tax rates
• What happens to tax revenue after point 'T' on the Laffer curve?

  It begins to decrease