Question

Give two advantages of public expenditure.

Briefly explain the importance of public expenditure in the industrial development of developing countries.

What is the significance of public expenditure in promoting economic development?

In what way the public expenditure policy be directed towards promoting economic development and reducing inequalities of income and wealth?

Explain two ways by which it promotes economic development.

How has public expenditure become an important tool for economic development in recent times?

Explain how public expenditure is helpful in reducing inequalities of income and wealth.

Answer 1

Public expenditure is important from the following angles:

1. Increase in Aggregate Demand: Public expenditure increases aggregate demand for goods and services, which in turn raises the level of output. It generates income in the economy, which creates more demand.
2. Redistribution of Income: Through its various expenditure programmes, the government can redistribute national income and reduce inequalities in the distribution of income.
3. Larger Employment Opportunities: Public expenditure on economic and social infrastructure provides larger employment opportunities and raises the productive capacity of the economy.

Answer 2

Public expenditure can lessen inequalities of income and wealth through its welfare measures like free education, free medical facilities and social security schemes like old-age pension, unemployment allowance, etc. Inequality of income can also be lessened by providing subsidies on goods of consumption to be used by the poor.