InterviewSolution
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InterviewSolution
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Explain the distinction between the following: (a) Revenue Expenditure and Capital Expenditure in a government budget (b) Primary Deficit and Fiscal Deficit |
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Answer» Solution : Government BUDGET is defined as a statement of planned RECEIPTS and planned expenditure of the government during a fiscal year: Its major components are: REVENUE Receipts: the receipts which neither create a liability nor lead to reduction in assets. Capital Receipts : the receipts which either create a liability or lead to reduction in assets. (iii) Revenue Expenditure:the expenditure which does not lead to any creation of assets or reduction in liabilities iv. Capital expenditures : the expenditure which leads to creation of assets or reduction in liabilities. OR Objectives of Government Budget: Allocation of Resources in the economy There are many non-profitable economic activities which are not undertaken by the private sector like, water supply, sanitation, etc., but are necessarily undertaken by government in public interest. So, Government can undertake these activities in order to create social welfare. In addition government can encourage the private sector through tax concessions, subsidies, etc, to undertake certain production in public interest. Economic Stability Economic Stability means absence of large-scale fluctuation in prices. Such fluctuations create uncertainties in the economy. Government can exercise control over these fluctuations through taxes and expenditure. For example, under inflationary situations, government may discourage spending by increasing taxes or reducing its own expenditure, whereas, under deflationary CONDITIONS, government may encourage spending by giving tax concessions, subsidies, etc. |
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