Is the following, revenue expenditure or capital expenditure in the context of government budget? Give reason.
(i) Expenditure on collection of taxes.
(ii) Expenditure on purchasing computers.
An expenditure that neither creates an asset nor reduces a liability is categorised as revenue expenditure. If it creates an asset or reduces a liability, it is categorised as capital expenditure.
1. Expenditure on collection of taxes is a revenue expenditure. This type of expenditure includes the government expenditure which does not cause any reduction in government liabilities and also does not create assets for the government.
2. Expenditure on purchasing computers is a capital expenditure. This expenditure includes that government expenditure, which causes reduction in the government liabilities as well as creates assets for the government.
Define externalities. Give an example of negative externality. What is its impact on welfare?
Recently Government of India has doubled the import duty on gold. What impact is it likely to have on foreign exchange rate and how?
