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WAEC Economics 1991 (August) Question 19

Question 19

Public Finance

Public expenditure creates expansionary effects in the economy when it is

  1. A.in excess of government revenue
  2. B.channelled into the provision of consumer goods
  3. C.diverted to the importation of luxury goods
  4. D.financed through oil revenue
  5. E.financed completely through part of the year's total tax collected.
Show the answer and explanation

Answer: A (in excess of government revenue)

Explanation

Spending more than revenue (a budget deficit) adds to total demand and expands the economy.