What Is Revenue Expenditure?

Income-expenditure theory is a western economic theory that studies the actual income, output, employment, and the level of economic development and the value of money, starting from the reciprocating movement of currency revenue and expenditure. The core idea is that the currency revenue and expenditure movement is based on realistic economic processes. The increase in currency expenditure, the increase in effective social demand, the increase in employment, the development of production, the increase in the supply of goods, and the increase in the real income level of society; on the contrary, the decrease in currency expenditure and The decrease in effective demand, increased unemployment, shrinking production, reduced supply of goods, and lower real income levels in society, and the comparison of monetary income and expenditure determines the general price level and monetary value.

Income and expenditure theory

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Income-expenditure theory starts from the reciprocating movement of currency revenue and expenditure, and studies a kind of western study of actual income, output, employment, and the level of economic development and the value of money.

British

He also pointed out that the income expenditure theory was replaced by a list of economic behaviors.

The theory of income and expenditure has not only become the theoretical basis for formulating policies in Western countries, but has also caused a great response in the academic community. Its characteristics are:

The theory of income and expenditure organically combines general value theory with monetary theory, and overcomes the dichotomy in the previous economic theory research (that is, divides economics into two separate parts such as value and money and price theory).

Highlighted the importance of investment and clarified the actual role of currency. The saving-investment theory, which is the core of this doctrine, believes that from the depression to the beginning of economic recovery, it is not due to an increase in the money supply, but to an increase in investment. Although an increase in the money supply will cause interest rates to fall, it will not lead to an increase in investment; investment will only increase if the marginal efficiency of capital increases. Because of insufficient money, there is a shortage of funds for investment, which will inevitably lead to an increase in interest rates, a decrease in the marginal efficiency of capital, a decrease in investment and an increase in savings, thereby preventing further economic development.

Contrary to the view of early currency quantity theorists that the velocity of currency circulation is generally stable and can be regarded as a constant, the income and expenditure theory believes that the velocity of currency circulation is not stable and it may be accelerated or slowed down. When saving is greater than investment, the proportion of people holding their monetary wealth in the form of cash and currency claims rises, and the speed of currency circulation slows down; on the contrary, when investment exceeds savings, the speed of currency circulation accelerates.

The quantity theory of money assumes full employment, and considers that the relationship between the quantity of money and the price level is direct and changes in the same proportion. However, income and expenditure do not assume full employment, and believe that the relationship between the quantity of money and the price level is indirect and does not necessarily change in the same proportion. When resources are not fully utilized, the price level does not change in proportion to the increase in the money supply, but causes an increase in output and employment.

The income and expenditure theory clarifies that the effect of changes in the quantity of money on the price level is not a simple causal relationship, but a gradual process. Changes in the money supply cause changes in interest rates, and changes in interest rates affect the balance of savings and investment, which will change people's economic activities, which will affect employment, output, income, and price levels.