Public spending (characteristics, objective and importance)

Public expenditure is the total expenditure made by the public sector, within the acquisition of goods and services and in the provision of transfers and subsidies. In the economy markets, the fundamental destination of public spending satisfies collective needs, while that those for public consumption are produced solely with the intention of correcting the deficiencies of the market.

These expenses tend to be transferred to achieve the redistribution of income and wealth. It can be said in a simpler way, that it is the totality of the expense that the state makes to make the purchase of goods and services as when it grants subsidies.

Characteristics of public spending

Within these expenses are a series of characteristics, such as those mentioned below:

• It must be done through a public entity.
• It can be limited and linked, since the total expenditure authorized by the legislature should not be exceeded.
• It must solve and benefit the needs of society.
• Its purpose is to be of great public utility.
• Its inclusion as a budget credit requires an authorization from the general court to use the public resources in the process of the objectives that are exposed in the different programs of budgets.

Influence of public spending on the economy

These expenses provide the facility to respond to all the needs that society requires and intervenes in the various economic factors both positively and negatively, among these factors are find:

job

Public spending can have a positive influence on the job formation of a society, everything will depend on what the government wants to spend for that item. It may happen that the production of a state is affected by this type of expenditure, which could indirectly influence job creation.

It is important to bear in mind that there are many regions, where your only employer is the state, therefore, this is only possible at this type of expense.

Saving

This is supported by the taxes paid by the contribution of the same company, so Therefore, it has a negative influence on their ability to save, which decreases the increase in taxes.

Investment

It is directly linked to saving, since the ability to save may decrease as well as the possibility of investment.

Inflation

The increase in public spending allows the increase in the value of goods and services and because of this inflation occurs, in other words, if produces an increase in the demand for goods and services without any type of offers that are sufficient to cover it, the unfavorable increase in prices.

Types of public spending

Most expenses are not the same, therefore, they can be classified as follows:

Investment expense

It is defined as the state distribution that allocates the acquisition or production of goods or capital, which increase the fixed assets of the state and serve to improve the production of goods and services public.

Transfer cost

It is the capital that the nation provides to businesses and families that really need it. Different programs and social systems can be used, such as social security, racks, unemployment insurance, subsidies, financing, etc.

Capital expenditure

It refers to spending that has the capacity to maintain or improve the nation's productivity in relation to infrastructure.

Current or consumer expenses

This is the set of expenses allocated to human resources contracts and the acquisition of the fundamental goods and services for a good development in the operation of the government.

This type of expenses includes the necessary distributions for the different institutions of the state that provide educational services, health, drinking water, electricity, among others, and pension and subsidy payments that benefit the low-income population.

What is the importance of public spending

This type of spending is one of the most important elements in the economic policy of a state. It allows the nation and its agencies the solution to meet the needs of society such as health, security, education and justice services.

Thanks to the investment in these expenses by the state, it is possible to achieve a favorable distribution of the income and wealth of the nation. In this way, it becomes a tool that benefits and solves the problems of inequality in society.

In the event of mismanagement, a devaluation or a possible adjustment may occur that will negatively influence the nation's economic system.

What is the scope of public spending

Within the public sector, it is sought to find some ends through this type of expenditure, this is due to the existence of certain cases in where the increase in expenses does not allow the determined purposes to be achieved, however, on some occasions they can be found with ease.

Many times these expenses are used to provide basic services to society and in turn the following objectives:

• Provision of public services that are administrative, health, security and judicial, among others.
• Increase the level of development and economic growth.
• Conserve and maintain the existing capital in the nation.
• Try to maintain the stability of the general level of prices and find a system that manages to capture new jobs.
• Collaborate with the equitable distribution of income and national wealth.
• Stimulate the development of tourism.
• Expand agricultural development.
• Improve the attention of most of the needs that are productive and favorable, with the purpose of ensuring the supply of steel, energy and infrastructure in general.
• Cover the needs of social consumption.
• Increase export systems.

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