Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Expenditure decisions by the government primarily affect which group?

1. Consumers

2. Suppliers to the government

3. Taxpayers

4. Private sector businesses

The correct answer is: Suppliers to the government

Expenditure decisions made by the government primarily impact suppliers to the government. This is because government spending often involves contracts for goods and services, which directly benefits companies that supply these products or services. When the government allocates budget funds for infrastructure projects, healthcare services, or educational resources, the suppliers of these goods and services see a direct effect in terms of increased demand, business growth, and financial gain. Suppliers may include construction firms, healthcare providers, educational institutions, and many others who engage in contractual relationships with the government. As such, fluctuations in government expenditure can lead to changes in revenue, job creation, and opportunities within these supplying sectors. While consumers, taxpayers, and private sector businesses may also experience indirect impacts from government spending and investment (such as improved public services or economic stimulation), the most direct effect is on those entities directly contracted by the government for supplied goods and services.