Expenditures and the Effects of Fiscal Policy are stated as follows:
Having finished the discussion on the tax policy and taxation, now let’s us focus on expenditures and the effects of the fiscal policy in aggregate.
Expenditures might be categorized as the recurrent and development/growth. The previous includes interest payments on the debt, salaries and the administrative expenses of all government ministries and the departments, and other exigent recurrent charges on exchequer. The latter majorly social sector capital expenditures, especially those which are expected to yield from the long-term development profit. Examples are building the school or hospital, laying down the new railway system, building a motorway and many more.
Governments many times promise to undertake heavy development and the social sector (which is health, education etc.) expenditures, but due to the scarcity of the revenues and borrowing possibilities, can only manage little development expenditures. A greater part of the budget in most countries and is committed to recurrent charges.
Repayment of the debt is reported below the line with the other borrowing and debt aggregates, as it is neither strictly recurrent nor much development spending.
Revenues – (recurrent + development expenditures) + interest payments on debt] gives us the primary surplus, which means that the amount available to service the burden of the public debt.