Fiscal Policy — Part 2: Public Expenditure and Public Debt: visual lesson, ISC Class 12 Economics

Lesson

Public Expenditure and Public Debt

Part 2 — how the government spends, why it borrows, and how it repays.

In this lesson you will

Explain the meaning and importance of public expenditure, and kinds of public spending
Explain public debt, internal and external, and the methods of redeeming it
Explain the meaning of deficit financing and its main risk

Part 2 at a glance

Concept

Public expenditure is the spending of central, state and local governments on goods, services, salaries, transfers and assets.

Table of kinds of public expenditure: developmental spending such as check dams and schools raises capacity, non-developmental spending such as interest keeps the state running, and transfer payments such as pensions move income without production
Kind of spending	Imagined example	Effect
Developmental	Check dams, schools, roads	Raises productive capacity
Non-developmental	Interest on old loans, administration	Keeps the state running
Transfer payment	Old-age pensions, scholarships	Moves income; nothing produced in return

Diagram

Why public spending matters

Growth, human capital, jobs and fairness.