Government spending - wikipedia Government spending `` Public Purse '' and `` Public money '' redirect here. For the term used in relation to the British monarchy, see Privy Purse. For the academic journal formerly called Public Money, see Public Money & Management. Public finance Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix Fiscal policy Budget policy Debt external internal Deficit / surplus Finance ministry Fiscal union Revenue Spending deficit Tax Monetary policy Bank reserves requirements Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary ( currency ) union Money supply Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / commerce ministry Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending Optimum Balanced budget Economic growth Price stability Reform Fiscal adjustment Monetary reform Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment ( government gross capital formation ). These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product. Government spending can be financed by government borrowing, or taxes. Changes in government spending is a major component of fiscal policy used to stabilize the macroeconomic business cycle. Contents 1 Macroeconomic fiscal policy 2 Current use : final consumption expenditure 3 National defense spending 4 Healthcare and medical research 5 Infrastructure and investment : gross fixed capital formation 6 Transfer payment spending 7 Per capita spending 8 As a percentage of GDP 9 Public social spending by country 10 See also 11 References 12 External links Macroeconomic fiscal policy Main article : fiscal policy The Market for Capital ( the Loanable Funds Market ) and the Crowding Out Effect. An increase in government deficit spending `` crowds out '' private investment by increasing interest rates and lowering the quantity of capital available to the private sector. Government spending can be a useful economic policy tool for governments. Fiscal policy can be defined as the use of government spending and / or taxation as a mechanism to influence an economy. There are two types of fiscal policy : expansionary fiscal policy, and contractionary fiscal policy. Expansionary fiscal policy is an increase in government spending or a decrease in taxation, while contractionary fiscal policy is a decrease in government spending or an increase in taxes. Expansionary fiscal policy can be used by governments to stimulate the economy during a recession. For example, an increase in government spending directly increases demand for goods and services, which can help increase output and employment. On the other hand, contractionary fiscal policy can be used by governments to cool down the economy during an economic boom. A decrease in government spending can help keep inflation in check. During economic downturns, in the short run, government spending can be changed either via automatic stabilization or discretionary stabilization. Automatic stabilization is when existing policies automatically change government spending or taxes in response to economic changes, without the additional passage of laws. A primary example of an automatic stabilizer is unemployment insurance, which provides financial assistance to unemployed workers. Discretionary stabilization is when a government takes actions to change government spending or taxes in direct response to changes in the economy. For instance, a government may decide to increase government spending as a result of a recession. With discretionary stabilization, the government must pass a new law to make changes in government spending. John Maynard Keynes was one of the first economists to advocate for government deficit spending as part of the fiscal policy response to an economic contraction. According to Keynesian economics, increased government spending raises aggregate demand and increases consumption, which leads to increased production and faster recovery from recessions. Classical economists, on the other hand, believe that increased government spending exacerbates an economic contraction by shifting resources from the private sector, which they consider productive, to the public sector, which they consider unproductive. In economics, the potential `` shifting '' in resources from the private sector to the public sector as a result of an increase in government deficit spending is called Crowding Out. The figure to the right depicts the Market for Capital, otherwise known as the Market for Loanable Funds. The downward sloping demand curve D1 represents demand for private capital by firms and investors, and the upward sloping supply curve S1 represents savings by private individuals. The initial equilibrium in this market is represented by point A, where the equilibrium quantity of capital is K1 and the equilibrium interest rate is R1. If the government increases deficit spending, it will borrow money from the private capital market and reduce the supply of savings to S2. The new equilibrium is at point B, where the interest rate has increased to R2 and the quantity of capital available to the private sector has decreased to K1. The government has essentially made borrowing more expensive and has taken away savings from the market, which `` crowds out '' some private investment. The crowding out of private investment could limit the economic growth from the initial increase government spending. Current use : final consumption expenditure Main article : Government final consumption expenditure Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is called government final consumption expenditure ( GFCE. ) It is a purchase from the national accounts `` use of income account '' for goods and services directly satisfying of individual needs ( individual consumption ) or collective needs of members of the community ( collective consumption ). GFCE consists of the value of the goods and services produced by the government itself other than own - account capital formation and sales and of purchases by the government of goods and services produced by market producers that are supplied to households -- without any transformation -- as `` social transfers '' in kind. National defense spending See also : Military budget and List of countries by military expenditures The United States spends vastly more than other countries on national defense. The table below shows the top 10 countries with largest military expenditures as of 2015, the most recent year with publicly available data. As the table suggests, the United States spent nearly 3 times as much on the military than China, the country with the next largest military spending. The U.S. military budget dwarfed spending by all other countries in the top 10, with 8 out of countries spending less than $100 billion in 2016. List by the Stockholm International Peace Research Institute 2017 Fact Sheet ( for 2016 ) SIPRI Military Expenditure Database Rank Country Spending ( US $ Bn. ) % of GDP World total 1,686 01 United States 611.2 3.3 02 China, P.R. 215.7 1.9 03 Russia 69.2 5.3 04 Saudi Arabia 63.7 10 05 India 55.9 2.5 06 France 55.7 2.3 07 United Kingdom 48.3 1.8 08 Japan 46.1 1.0 09 Germany 41.1 10 South Korea 36.8 2.7 Healthcare and medical research Research Australia found 91 % of Australians think ' improving hospitals and the health system ' should be the Australian Government 's first spending priority. Crowding ' in ' also happens in university life science research Subsidies, funding and government business or projects like this are often justified on the basis of their positive return on investment. Life science crowding in contrasts with crowding out in public funding of research more widely : `` 10 % increase in government R&D funding reduced private R&D expenditure by 3 %... In Australia the average cost of public funds is estimated to be $1.20 and $1.30 for each dollar raised ( Robson, 2005 ). The marginal cost is probably higher, but estimates differ widely depending on the tax that is increased. '' Infrastructure and investment : gross fixed capital formation Main article : Gross fixed capital formation Further information : Investment § In economics or macroeconomics Government acquisition intended to create future benefits, such as infrastructure investment or research spending, is called gross fixed capital formation, or government investment, which usually is the largest part of the government. Acquisition of goods and services is made through production by the government ( using the government 's labour force, fixed assets and purchased goods and services for intermediate consumption ) or through purchases of goods and services from market producers. In economic theory or in macroeconomics, investment is the amount purchased per unit of time of goods which are not consumed but are to be used for future production ( i.e. capital ). Examples include railroad or factory construction. Infrastructure spending is considered government investment because it will usually save money in the long run, and thereby reduce the net present value of government liabilities. Spending on physical infrastructure in the U.S. returns an average of about $1.92 for each $1.00 spent on nonresidential construction because it is almost always less expensive to maintain than repair or replace once it has become unusable. Likewise, government spending on social infrastructure, such as preventative health care, can save several hundreds of billions of dollars per year in the U.S., because for example cancer patients are more likely to be diagnosed at Stage I where curative treatment is typically a few outpatient visits, instead of at Stage III or later in an emergency room where treatment can involve years of hospitalization and is often terminal. Transfer payment spending Main article : Transfer payment Government expenditures that are not acquisition of goods and services, and which represent transfers of money such as social security payments, are called transfer payments. These payments are considered to be non-exhaustive because they do not directly absorb resources or create output. In other words, transfers are made without an exchange of goods or services. Examples of certain transfer payments include welfare ( financial aid ), social security, and government giving subsidies to certain businesses ( firms ). Per capita spending In 2010 national governments spent an average of $2,376 per person, while the average for the world 's 20 largest economies ( in terms of GDP ) was $16,110 per person. Norway and Sweden expended the most at $40,908 and $26,760 per capita respectively. The federal government of the United States spent $11,041 per person. Other large economy country spending figures include South Korea ( $4,557 ), Brazil ( $2,813 ), Russia ( $2,458 ), China ( $1,010 ), and India ( $226 ). The figures below of 42 % of GDP spending and a GDP per capita of $54,629 for the U.S. indicate a total per person spending including national, state, and local governments was $22,726 in the U.S. As a Percentage of GDP Tax Burden as a Percentage of GDP ( 2014 Index of Economic Freedom ). Public spending / GDP in Europe. Legend : maroon > 55 %, red 50 -- 55 %, orange 45 -- 50 %, yellow 40 -- 45 %, green 35 -- 40 %, blue 30 -- 35 % This is a list of countries by government spending as a percentage of gross domestic product ( GDP ) for the listed countries, according to the 2014 Index of Economic Freedom by The Heritage Foundation and The Wall Street Journal. Tax revenue is included for comparison. List of Countries as a % of GDP. Country Tax burden % GDP Govt. expend. % GDP Afghanistan 9 23 Albania 23 28 Algeria 10 40 Angola 6 39 Argentina 35 41 Armenia 17 25 Australia 26 35 Austria 42 51 Azerbaijan 13 34 Bahamas 16 23 Bahrain 31 Bangladesh 10 16 Barbados 27 41 Belarus 25 36 Belgium 44 53 Belize 23 29 Benin 16 22 Bhutan 14 38 Bolivia 22 35 Bosnia and Herzegovina 39 49 Botswana 28 32 Brazil 35 39 Bulgaria 26 34 Burkina Faso 14 24 Burma 19 Burundi 14 40 Cambodia 11 20 Cameroon 11 22 Canada 31 42 Cape Verde 20 32 Central African Republic 9 16 Chad 5 26 Chile 19 23 China 19 24 Colombia 15 29 Comoros 12 22 Democratic Republic of the Congo 24 29 Congo 8 26 Costa Rica 22 18 Ivory Coast 13 26 Croatia 33 43 Cuba 24 67 Cyprus 27 46 Czech Republic 35 43 Denmark 48 58 Djibouti 20 35 Dominica 24 36 Dominican Republic 13 16 Ecuador 18 44 Egypt 14 32 El Salvador 15 22 Equatorial Guinea 35 Eritrea 50 34 Estonia 33 38 Ethiopia 11 18 Fiji 23 28 Finland 43 55 France 44 56 Gabon 10 25 Gambia 13 26 Georgia 25 32 Germany 37 45 Ghana 15 24 Greece 31 52 Guatemala 11 15 Guinea 16 22 Guinea - Bissau 9 21 Guyana 21 31 Haiti 13 34 Honduras 16 26 Hong Kong 14 19 Hungary 36 49 Iceland 36 47 India 7 27 Indonesia 12 19 Iran 9 22 Iraq 45 Ireland 28 48 Israel 33 45 Italy 43 50 Jamaica 23 32 Japan 28 42 Jordan 14 33 Kazakhstan 15 22 Kenya 20 29 Kiribati 20 92 North Korea N / A N / A South Korea 26 30 Kuwait 39 Kyrgyzstan 19 36 Laos 14 21 Latvia 27 39 Lebanon 17 30 Lesotho 38 63 Liberia 20 31 Libya 67 Liechtenstein N / A N / A Lithuania 16 38 Luxembourg 37 42 Macau 35 17 Macedonia 26 31 Madagascar 11 16 Malawi 20 35 Malaysia 15 29 Maldives 16 43 Mali 14 25 Malta 34 42 Mauritania 18 28 Mauritius 18 25 Mexico 11 27 F.S. Micronesia 12 65 Moldova 31 39 Mongolia 33 45 Montenegro 24 44 Morocco 23 35 Mozambique 20 34 Namibia 28 37 Nepal 13 19 Netherlands 39 50 New Zealand 32 48 Nicaragua 18 26 Niger 14 20 Nigeria 5 29 Norway 43 44 Oman 38 Pakistan 9 20 Panama 18 27 Papua New Guinea 26 29 Paraguay 13 19 Peru 17 19 Philippines 12 16 Poland 32 44 Portugal 31 49 Qatar 31 Romania 28 37 Russia 30 36 Rwanda 13 27 Saint Lucia 25 35 Saint Vincent and the Grenadines 22 30 Samoa 23 44 São Tomé and Príncipe 17 49 Saudi Arabia 35 Senegal 19 29 Serbia 35 45 Seychelles 32 36 Sierra Leone 12 22 Singapore 14 17 Slovakia 29 38 Slovenia 37 51 Solomon Islands 37 51 South Africa 27 32 Spain 32 45 Sri Lanka 12 21 Sudan 7 18 Suriname 19 27 Swaziland 23 31 Sweden 45 51 Switzerland 29 34 Syria 10 N / A Taiwan 9 23 Tajikistan 20 27 Tanzania 15 27 Thailand 16 23 Timor - Leste 61.5 51.2 Togo 17 24 Tonga 18 29 Trinidad and Tobago 17 35 Tunisia 21 35 Turkey 25 35 Turkmenistan 18 15 Uganda 17 21 Ukraine 38 46 United Arab Emirates 6 24 United Kingdom 36 49 United States 25.1 41.6 Uruguay 27 33 Uzbekistan 20 31 Vanuatu 16 25 Venezuela 13 40 Vietnam 21 31 Yemen 5 29 Zambia 19 24 Zimbabwe 30 35 Somalia N / A N / A Brunei 24 34 Public social spending by country Government Expenditure as a Percentage of GDP ( 2014 Index of Economic Freedom ). Public social spending comprises cash benefits, direct in - kind provision of goods and services, and tax breaks with social purposes provided by general government ( that is central, state, and local governments, including social security funds ). 2015 Public social spending, OECD Country Public social spending % of GDP France 31.7 Finland 30.6 Belgium 29.2 Italy 28.9 Denmark 28.8 Austria 28.0 Sweden 26.7 Greece 26.4 Spain 25.4 Germany 25.0 Portugal 24.1 Norway 23.9 Slovenia 22.4 Netherlands 22.3 Luxembourg 22.2 Great Britain 21.5 OECD 21.0 Hungary 20.7 New Zealand 19.7 Switzerland 19.6 Czech Republic 19.5 Poland 19.4 Slovakia 19.4 United States 19.0 Australia 18.8 Canada 17.2 Estonia 17.0 Ireland 17.0 Israel 16.0 Iceland 15.7 Latvia 14.4 Chile 11.2 South Korea 10.1 See also Rahn curve Government operations Public expenditure Public finance Government budget Government waste Fiscal policy Tax Mandatory spending Taxpayers unions Eurostat Government spending in the United Kingdom Government spending in the United States References Jump up ^ `` Frequently Asked Questions : BEA seems to have several different measures of government spending. What are they for and what do they measure ? ''. Bureau of Economic Analysis. 28 May 2010. Retrieved 12 July 2014. Jump up ^ Robert Barro and Vittorio Grilli ( 1994 ), European Macroeconomics, Ch. 15 -- 16. Macmillan, ISBN 0 - 333 - 57764 - 7. ^ Jump up to : Taylor, Timothy, ( 2017 ). Principles of Macroeconomics : Economics and the Economy ( Fourth ed. ). Minneapolis : Textbook Media Press. pp. 366 -- 340. ISBN 9780996996334. OCLC 1001342630. ^ Jump up to : Gregory, Mankiw ( 2014 ). Principles of Economics ( Seventh ed. ). Stamford, CT : Southwestern Publishing Group. ISBN 9781285165875. OCLC 884664951. ^ Jump up to : Jonathan, Gruber. Public Finance and Public Policy ( Fifth ed. ). New York : Worth Publishers. ISBN 9781464143335. OCLC 914290290. Jump up ^ Irvin, Tucker ( 2012 ). Macroeconomics for Today ( 8th ed. ). Mason, OH : Cengage Learning. ISBN 9781133435051. OCLC 830731890. Jump up ^ F. Lequiller, D. Blades : Understanding National Accounts, Paris : OECD 2006, pp. 127 -- 30 Jump up ^ `` Trends in World Military Expenditure, 2016 '' ( PDF ). Stockholm International Peace Research Institute. Retrieved 24 April 2017. Jump up ^ `` Data for all countries from 1988 -- 2016 in constant ( 2015 ) USD ( pdf ) '' ( PDF ). SIPRI. Retrieved 24 April 2017. ^ Jump up to : SIPRI estimate. Jump up ^ The figures for Saudi Arabia include expenditure for public order and safety and might be slightly overestimated. Jump up ^ `` Research Australia ''. crm.researchaustralia.org. Jump up ^ http://www.nber.org/papers/w15146.pdf Jump up ^ `` Do innovation programs actually increase innovation ? ''. robwiblin.com. 24 September 2012. Jump up ^ `` Gross capital formation '' Statistics Explained European Union Statistics Directorate, European Commission Jump up ^ Cohen, Isabelle ; Freiling, Thomas ; Robinson, Eric ( January 2012 ). The Economic Impact and Financing of Infrastructure Spending ( PDF ) ( report ). Williamsburg, Virginia : Thomas Jefferson Program in Public Policy, College of William & Mary. p. 5. Archived from the original ( PDF ) on 3 May 2012. Retrieved 1 October 2012. Jump up ^ Hogg, W. ; Baskerville, N. ; Lemelin, J. ( 2005 ). `` Cost savings associated with improving appropriate and reducing inappropriate preventive care : Cost - consequences analysis '' ( PDF ). BMC Health Services Research. 5 ( 1 ) : 20. doi : 10.1186 / 1472 - 6963 - 5 - 20. PMC 1079830. PMID 15755330. Jump up ^ Bishop, Matthew ( 2012 ). `` Economics AZ -- terms beginning with T ; transfer ''. The Economist. Retrieved 11 July 2012. Payments that are made without any good or service being received in return. Much PUBLIC SPENDING goes on transfers, such as pensions and WELFARE benefits. Private - sector transfers include charitable donations and prizes to lottery winners. Jump up ^ CIA World Factbook, population data from 2010, Spending and GDP data from 2011. Note : these numbers do not include U.S. state and local government spending which when included bring the per capita spending to $16,755 ^ Jump up to : `` Economic Data and Statistics on World Economy and Economic Freedom ''. www.heritage.org. ^ Jump up to : `` Social spending Public, % of GDP, 2015 ''. OECD. OECD data External links Wikimedia Commons has media related to Government Spending. Wikimedia Commons has media related to Public expenditure. OECD Government spending statistics Canadian Governments Compared Eurostat 's government spending per sector GND : 4043136 - 8 NDL : 00566500 Retrieved from `` https://en.wikipedia.org/w/index.php?title=Government_spending&oldid=864545754 '' Categories : Government spending Government finances Fiscal policy Hidden categories : All articles that are too technical Wikipedia articles that are too technical from May 2014 All articles needing expert attention Articles needing expert attention from May 2014 Use dmy dates from September 2011 Wikipedia articles with GND identifiers Wikipedia articles with NDL identifiers Talk Contents About Wikipedia Čeština Deutsch فارسی मराठी Nederlands 日本 語 ភាសា ខ្មែរ Polski Русский Українська اردو Tiếng Việt 4 more Edit links This page was last edited on 17 October 2018, at 22 : 32 ( UTC ). Text is available under the Creative Commons Attribution - ShareAlike License ; additional terms may apply. By using this site, you agree to the Terms of Use and Privacy Policy. Wikipedia ® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization. About Wikipedia

Question: what percentage of us gdp is government spending
Answer: 41.6