Increased govt spending may not necessarily mean an increase in the SOL of the people. Govt budget comes from taxpayers in the form of taxes – direct and indirect. Like SG in the form of personal income tax (direct) and GST (indirect). An increase in govt spending would mean an increase in tax on the people to fund the govt spending. An increase in taxes would mean lower purchasing power of people as well as a decrease in disposable income, resulting in a reduction in the consumption of amount of goods and services. Hence, leading to a decrease in the quantitative aspect of SOL. 

Increased govt spending doesn’t necessarily mean an increase in the SOL as it also depends on what the govt is spending on and if the govt is running on a deficit or surplus. 

If the govt is spending more but is running on a deficit then it will not increase the SOL. Budget deficit is when the govt spending is greater than the revenue it generates and continuous deficits will lead to the government being in debt like in the case of Greece whose budget deficit was 12.9 percent of its gross domestic product after 10 years of overspending. This means that the govt of Greece would direct its spending towards repaying its accumulated debt instead of increasing and improving the amount and quality of goods and services available for the consumption of the people. Hence, the quantitative aspect of SOL of the people did not increase. In the long run, this will scare off investors, worsening the chance of the government finding the funds to repay its debt as with the case of Greece. Because of the lack of investors, there will be a decrease in jobs and unemployment rose to 25 percent and riots erupted in the streets of Greece. Hence, decreasing the qualitative SOL of the people as society is unrest and dangerous. 

What the govt is spending on also dictates whether the SOL increase when govt spending increases. If the govt spends on things like military ammunition and vehicles, which are not for direct consumption of the people, then the increased govt spending will not increase the SOL of the people as there is no increase in the amt of goods and services available for consumption. However, it has to be noted that although there may not be an increase in the goods and services available for consumption, in the long run, spending on military defences will improve the security of the country from potential threats and could provide a better security system for the people which would mean an increase in the quality of life as people live safer lives. Where the increase in govt spending is directed to and if it improves the SOL depends on how much of the increase in govt spending was spent on it and the relative benefits it would bring with regards to the increase in spending. Short term and long term effects should also be considered like for example when Greece hosted the Olympics. The govt spent a huge amount on constructing facilities for the Olympics. In the short run, it benefited Greece as it left a good impression of Greece on investors because the quality of the infrastructures and facilities. In the long run however, the facilities became obsolete and abandoned, which means that the huge government spending was pointless in the long run as it did not serve any purpose like increasing the services available for the people of greece as people do not use the facilities. Hence, the spending went to waste.

Increased govt spending contributes to an increase in the AD which will in turn lead to the increase of national income through the multiplier effect. When govt increases its spending, the AD increases and firms will employ more factor inputs from households to increase production and hence will pay household more factor income. The increase in income induces households to increase consumption which leads to a rise in AD which will lead on to the continuous cycle of firms employing more and households consuming more, resulting in an increase in National income. An increase in national income means increased purchasing power of people, allowing them to consume more goods and services, thus improving the quantitiave SOL of people. Also, in the multiplier process, unemployment is decreased , leading to more positive sentiments of the people and lesser social unrest. Hence, an increase in qualitative SOL. However, the qualitative aspect of SOL may not necessarily increase when there is more employment. It could mean longer working hours and lesser leisure time for the people.

Increased govt spending means an increase in goods and services available for consumption to the public.  Like Sg where the increase in govt spending went to investing in infrastructure, including in the country's rail and ports and helping workers and companies through economic restructuring. The Sg govt is also spending more on healthcare to make it more affordable and accessible to the rising demand of healthcare due to our ageing population. Hence, by spending on different things like healthcare and infrastructure, there is an increase in the amount of goods and services available to consumers and thus, an increase in the quantitative aspect of SOL. There is also an increase in the qualitative aspect of SOL as we receive better quality healthcare treatments and better and stronger infrastructure such as better quality railways which improve our quality of transport. However, the increase in goods and services available for consumption may be at the expense of a cleaner environment. As the govt spends more on facilities and infrastructure, it may have been done with heavy pollution and harm to the environment which will not improve the qualitative SOL of the people as they live in a more polluted environment

 

Firstly, SOL measures the material and non-material wellbeing of its people. It comprise of both quantitative and qualitative aspects of living standards. Quantitative aspect refers to the amount of goods and services available for consumption. On the other hand, the qualitative aspect insclues infant mortality rates, quality and quantity of health care and leisure, quality of environment etc.

 

Greater government spending , being a component of aggregate demand , contributes to an increase in AD, which leads to a rightward shift in demand curve and hence increases real GDP. This means that the government is putting more funds on various parts of the economy that boost the country’s real GDP, perhaps pumping in money on healthcare especially due to ageing population in the case of Singapore. In SG Budget 2017, it is also mentioned that some portion of its budget is set aside for one-off special transfers which caters to the less well off, improving the SOL of those who needs financial aid. It must also be noted that a huge portion is also spent on infrastructure to attact foreign talends, might not directly affect one’s SOL. Also, real GDP refers to the total money value of all final goods and services produced within a country’s geographical boundary during a given period of time , taking into account inflation. However, the citizen’s quantitative SOL is not accurately measured, since high real GDP of the country might mean the rich minority and poor majority. It would then be more accurate to consider the citizens quantitative SOL , by dividing real GDP over population size.

This however, is also not sufficient to determine the SOL of the citizens due the limitations even with the real GDP per capita itself, arises from measurement, conceptual , exchange rate problems and it does not take into account qualitative aspect of citizen’s SOL. 

Firstly, greater government spending given to companies can help increase productivity as companies can now invest in machines that can help increase productive capacity. Hence , this shifts the aggregate supply (AS) curve outward and rightwards to AS1. As such, the aggregate demand (AD) curve cuts AS1 at national income(Y1), where Y1 is more than Y. With income rising, the country’s citizen would have higher purchasing power and increased willingness and ability to purchase goods and services. As such, there would be an improvement in quantitative standard of living as they are now able to consume more goods and services.

Secondly, greater government spending can help increase one’s income (as explained above). As such there would be increased tax revenue collected from increased household income. With more tax revenue collected, government would have more funds to spend on merit goods such as healthcare and education. With healthcare and education made more accessible to the country’s citizens, there would be an improvement in qualitative standard of living.

Firstly, the increase in government spending can be derived from the increase in tax collected from country’s citizens. In this case, the income increased from the increase in government spending previously will be eroded from the tax collected if tax is more than the increase in income. Hence, this reduces consumers purchasing power, reducing their willingness and ability to consume goods and services. As such, with ability reduced, it will worse the quantitative standard of living of the citizens