Question

Assertion (A): Government expenditure includes all government consumption, investment and transfer payments.

Reason (R): Public expenditure can broadly be classified into operating expenditure, redistribution expenditure, and investment expenditure.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true but Reason (R) is false.

• Assertion (A) is false but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Both statements are true and have a direct structural link. The assertion identifies the three main pillars of governmental spending: consumption, investment, and transfer payments. The reason gives an exact logical explanation for their inclusion by categorising them into broad, formal public finance categories where operating expenditure corresponds to consumption, redistribution expenditure corresponds to transfer payments, and investment expenditure corresponds to capital investments.