It is important to stress, however, that the difference between value added and final expenditure is not the government’s budget deficit. Rather, the deficit is government revenue (mainly taxes) minus expenses, including transfers of funds from the government to households, such as pensions and unemployment benefit–which, since households spend the money from pensions and benefits, are defined in national accounting as household, rather than government, spending (it’s the final expenditure that matters, remember). It is that household spending that counts towards final demand for the whole
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