Expenditure switching

Updated: Aug 20, 2021

A policy intended to divert an existing level of expenditure from one outlet to another. For example, tariffs or import quotas could be used to divert existing spending from imports on to home-produced goods. This is contrasted with expenditiure changing policies, intended to increase or decrease total spending. The distinction applies to the impact effect of the policy concerned: if an expenditure switching policy is successful it will produce multiplier effects which also change total spending. See also external balance; internal balance.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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