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Cuts in expenditure


Reductions in government spending. These may refer to changes in actual government spending which have already taken place, or, more usually, to announcements of planned reductions. Cuts in actual spending may be due to the application of unchanged spending rules in changing circumstances: for example, a reduction in unemployment benefits when employment rises during a boom. They may alternatively be due to a change in policy about spending, for example increasing the stringency of tests for eligibility for benefits. Similarly, announced plans to cut spending may be in anticipation of a reduction in the need for it, or an indication of changes in poli In an inflationary economy, government spending has to rise in money terms is to stay constant in real terms; ‘cuts’ can take the form of money increase smaller than anticipated increases in costs.


Reference: Oxford Press Dictonary of Economics, 5th edt.