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Evaluate the likely economic effects of this planned increase in government expenditure.

In 2016 the UK Chancellor of the Exchequer announced that the government would spend an extra £23 billion on innovation and infrastructure over the following five years. Evaluate the likely economic effects of this planned increase in government expenditure. (June 2018)

Essay plan

  • Intro
  • P1 - this is an example of expansionary fiscal policy
  • Diagram - AD right shift
  • Evaluation - increased budget deficit
  • P2 - this is also an example of supply-side policy
  • Diagram - LRAS right shift
  • Evaluation - opportunity cost and time lag