Public expenditure helps to attain economic stability in following ways:
Production and Employment:
It depends on:
The capability of the people to work, save and invest.
The will of the people to work, save and invest.
Transfer the resources to different uses and regions.
Government Expenditure and Economic Stability: The activities of the market economy are never alike. Sometimes, there is brisk in economic life while on other occasions, the business life faces sluggish behaviour. Thus after 1930‘s Great Depression, the economist is stressing upon economic stabilization. According to Keynes, economic crisis rose because AD was less than AS and lower MPC along with lower MEC played their role. Therefore, he stressed upon increasing consumption and investment for the sake of economic stability.
Public Expenditure and Economic Growth: The public expenditure can be used to remove unequal income distribution. The facilities of health, education and communication can be made available. All such means that government expenditure can be used for economic growth and development. Moreover, because of government expenditure, the incomes of the people through the multiplier process will increase. When income will increase, the saving will also increase, which can be used for investment. This shows that an increase in government expenditure can play a vital role in the economic growth of the country.
