Effects Of Public Expenditure On Economic Development And Stability
By Jignesh K. Sharma 10 B.Com. 38

-:Economic Stability:What Is Economic Stability ?  “Stable GDP Growth, Low Inflation And Unemployment.”
 “Economic Stability Refers To An Economy That Experiences Constant Growth And Low Inflation.”  Advantages Of Having Economic Stability Include Having  Increased Productivity,  Improved Efficiencies And Low Unemployment.  An Unstable Economy Causes A Decline In Consumer Confidence, Stunted Economic Growth And Reduced International Investments.

-: Economic Growth/ Development:What Is Economic Growth/Development ?  “Economic Growth Is A Term Generally Measured By The
Amount Of Production In A Country Or Region Over A Certain Period Of Time.”  In Addition To Production, Measured Through The Gross Domestic Product, Or GDP, Local Governments And Individuals May Use A Different Standard To Measure Economic Growth.

-: Effects Of Public Expenditure On Economic Stability : Increase In Public Expenditure Can Directly Increase Aggregate Effective Demand In The Economy.  An Increase In Public Expenditure During Depression, Therefore, Leads To A Larger Increase In Output, Income And Employment Through The Multiplier Process.  Public Works As Road, Canals, Dams, Parks, School, Hospitals And Other Buildings Etc.  Expenditure On Public Works Creates Demand For The Products Of The Private Construction Industries, While Expenditure On Relief Measures Stimulates The Demand For The Products Of Consumption Goods Industries.

-: Effects Of Public Expenditure On Economic Development : Public Expenditure On The Establishment Of Heavy And Basic Industries Strengthens The Industrial Base Of The Economy And Increases The Growth Rate Of The Economy In The Long Run.  Investment In The Heavy And Basic Industries Increases Incomes Immediately But It Increase Production In The Long Run. Hence A Imbalance Created Between The Demand And Supply Of Consumption Goods In The Economy.  To Remove This Imbalance, A Large Increase In Public Expenditure Is Necessary To Promote The Development Of Agriculture And Consumption Goods Industries.  Public Expenditure On Economic And Social O/H Such As Transport And Communication Facilitates The Process Of Economic Development.  To Weaken The Private Monopolies As Also To Bring The Commanding Heights Of The Economy Under State Control, The Government Establishing Business Enterprises In The Public Sector.  Public Expenditure Helps Private Enterprises Grow Rapidly By Establishing Specialized Financial Institutions Providing Long Term, And Medium Term Loans At Low Rate Of Interest.

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