Expenditure

• believed that an unregulated economy would result in low economic growth and high unemployment
• inherent instability of the economic cycle
• lack of AD leads to demand-deficient unemployment
• government should use fiscal policy to inject demand into the economy and boost growth

• using fiscal policy to stimulate/manage aggregate demand is ineffective and damaging
• 'big government' spending eventually leads to inflation (long run Phillips Curve)
• Keynesianism leads to 'crowding out'
• Crowding out: as the government sells more debt to finance a budget deficit, it has to keep raising interest rates to encourage people to purchase debt
• this affects private investment and lowers the level of investment throughout the economy

introduced in 2010:

1. The deficit rule: balance the government budget by the end of a five year period (i.e. 2015)- has since been extended

2. the debt rule: ensure the national debt is falling as a share of GDP by 2015/16- also extended the time limit