How_Money_Works_-_The_Facts_Visually_Explained

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GOVERNMENT FINANCE AND PUBLIC MONEY

Managing state finance

PRINTING MONEY

$6.7

trillion

the amount the US

government spent in 2016

Governments can issue their own money, either by

printing it or by creating it electronically. However,

creating money in this way carries a risk. Since money

depends on trust, when a government issues increasing

amounts of currency, people may have less confidence

in the value of that currency. If their trust collapses

completely, hyperinflation may occur (see pp.132–135).

This is what took place

in Germany in the 1920s,

for example.

CONSUMPTION

AND INVESTMENT

Government spending is a

mixture of paying for the

immediate costs of running

services, and investment in things

such as roads, hospitals, and

universities. Services such as

pensions, healthcare, education,

welfare, and defense are all major

elements of annual spending.

See pp.130 –131

DEBT REPAYMENT

Governments must

repay their debts. Paying

interest on debt can be a

significant budget cost.

S e e p p .110 –111

A BUDGET

IN BALANCE

The government

budget balance

is the overall

difference between

its revenues and its

spending.

Government revenue Government spending

$

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