Date of Award

5-2012

Access Control

Campus-Only Access

Degree Name

Applied Economics, M.A.

Department

Economics and Finance Department

Advisor

Dr.Ted Schmidt, Associate Professor of Economics

Department Home page

http://economics.buffalostate.edu/

First Reader

Dr.Ted Schmidt, Associate Professor of Economics

Second Reader

Dr.Theodore F. Byrley, Associate Professor of Economics

Third Reader

Dr.Bruce L. Fisher, Visiting Professor + Director

Abstract

Abstract

Policymakers are debating whether government expansion can impact economic growth. Those who support government spending argue that government programs provide valuable public goods such as education and infrastructure. In addition, they argue that increases in government spending can raise economic growth by encouraging people to spend, which then creates an incentive for expanding production.[1]

Opponents of government expansion advocate an open market economy where the government transfers economic activities to the private sector, so that the private sector takes over part of what the government had been doing. Moving from a policy regime of government intervention to open markets means that reform policies will move government out of areas where theoretically markets can perform better on the basis of the efficiency argument.[2]

The objective of this study is to research the question: does government spending have the potential to raise economic growth? In this paper we will evaluate how government spending affects economic growth, with the goal to determine if there is any significance relationship between government spending and economic growth. To test the thesis, this research analysis will look at the impact of fiscal policy and government spending on economic growth in Saudi Arabia and compare it with the US, an advanced western economy.

This thesis will be arranged in three chapters. The first chapter presents the historical background on the role of government and public finance theories. The second chapter reviews economic growth theories, the debates over the effectiveness of fiscal policy, and criticism of active fiscal policy. The third and last, chapter will present the core of the thesis, and introduce the background about Saudi Arabia, government structure, sources of finance, and aspects of government spending. In addition, we will compare fiscal policy in an advanced western economy (US) to that of Saudi Arabia.

[1] Zimbalist, A. S., & Sherman, H. J. (1989). Comparing Economic Systems: a Political-Economic Approach. (2nd ed.). San Diego: Harcourt Brace Jovanovich. 5-14.

[2] Cypher, J. M., & Dietz, J. L. (2002). The Process of Economic Development (Taylor & Francis e-Library ed.). London: Routledge,p.216.

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