Economics · Fiscal Policy
Evaluate the following regarding 'Revenue Expenditure' and 'Capital Expenditure': Statement I: Interest payments, subsidies, and pension payments are classified as Revenue Expenditure because they do not result in the creation of physical or financial assets. Statement II: Capital Expenditure includes loans given by the Union Government to State Governments and direct investments in infrastructure projects like national highways. Statement III: A persistently high 'Revenue Deficit' indicates that the government is dissaving and borrowing to meet its day-to-day consumption needs. Statement IV: The 'Golden Rule' of public finance states that the government should only borrow to fund its regular, operational Revenue Expenditure. Which of the following describes the validity of these statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1All statements are correct
- 2Statement III and IV are correct
- 3Statement II and IV are correct
- 4Only Statement I, II, and III are correct✓
Correct answer
Only Statement I, II, and III are correct
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