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