Test: Public Expenditure - Class 10 MCQ

The growth of public expenditure in a democratic society is often linked to the expansion of administrative machinery and efforts to maximize social and economic welfare. As democratic principles promote the need for more services and benefits, public expenditure tends to rise.

Urbanization tends to lead to higher public spending on civil services such as education, healthcare, and infrastructure. As populations grow in urban areas, the demand for these services increases, prompting governments to allocate more funds to meet the needs of urban residents.

Protective expenditure is primarily concerned with national security and law enforcement. This includes spending on defense, police services, and correctional facilities, which are essential for maintaining the safety and sovereignty of the nation.

Investment in education is considered optional expenditure, as it is not legally mandated but rather based on government priorities. Unlike obligatory expenditures, which are necessary for fulfilling contractual or legal responsibilities, optional expenditures reflect choices in funding areas deemed important for societal development.

Public expenditure can help reduce income inequality through welfare programs such as education and healthcare services, which provide support to underprivileged segments of society. By improving access to essential services, the government aims to level the playing field for all citizens.

Post-World War II, there was a consistent rise in price levels, which significantly impacted public expenditure. The government needed to spend more to acquire goods and services and to adjust salaries for government employees in response to inflation, leading to increased overall spending.

Developmental expenditure is primarily concerned with enhancing production capacity through investments in infrastructure and services that promote economic growth. This type of spending is crucial for fostering an environment conducive to business and industry development.

Rising public expenditure on welfare benefits typically leads to improved public services as the government allocates more funds to support essential services like healthcare, education, and social safety nets. This enhances the overall quality of life for citizens.

Primary expenditure primarily relates to essential services that ensure law and order, such as police and civil administration, while secondary expenditure includes spending on important services like health and education. This distinction highlights the different focuses of government spending in terms of immediate security versus long-term development.

Capital expenditure is characterized by the investment made to create capital assets, which leads to the formation of capital stock. This type of spending is crucial for infrastructure projects, such as building roads and bridges, which promote long-term economic development.

Obligatory expenditure refers to mandatory spending that the government must undertake, such as defense and contractual payments. This type of expenditure is essential for fulfilling the government’s legal and social obligations.

Commercial expenditure is specifically focused on promoting and supporting commercial activities. This includes expenses for industrial exhibitions and financial incentives known as bounties, which aim to encourage specific commercial ventures and stimulate economic activity.

Protective expenditure, while crucial for maintaining law and order, does not directly contribute to increasing economic productivity. Unlike productive expenditure, which enhances output, protective expenditure focuses on security and stability.

Variable expenditure increases with the level of public service usage. For example, costs for postal and telecommunications services rise as more citizens utilize these services, reflecting the direct relationship between service demand and expenditure.

The primary focus of unproductive expenditure is ensuring stability and security. While necessary for maintaining law and order, such expenditures do not directly contribute to increasing the output of goods and services, highlighting their role in sustaining societal order rather than economic productivity.

Transfer expenditure does not correspond to any specific productive service and includes payments such as old-age pensions. This type of spending is aimed at providing financial support to individuals rather than funding direct services or infrastructure.

The primary purpose of public expenditure is to support the welfare and development of the nation. This involves funding essential services such as infrastructure, education, and healthcare, which are crucial for enhancing the quality of life and promoting economic growth. Public expenditure plays a significant role in ensuring that the basic needs of society are met.

Revenue expenditure refers to the spending required to run government departments and maintain services without creating capital assets. Funding for public health services is a clear example of revenue expenditure, as it involves ongoing costs necessary for delivering health services to the public.

Public expenditure influences aggregate demand by increasing it, which encourages producers to ramp up production levels. As government spending rises, it leads to higher demand for goods and services, prompting businesses to expand their production capacity and hire more workers.

Developmental expenditure is aimed at promoting economic and social development. This includes investments in infrastructure projects, education, and health services that enhance the overall welfare of society and contribute to sustainable growth.