Question

Differentiate between direct and transfer expenditure.

Answer 1

	Direct Expenditure	Transfer Expenditure
1.	Expenditure incurred by the government on the purchase of goods and services and on current services of factors of production is called government direct expenditure.	Transfer expenditures are those expenditures that take the form of payments that are made without corresponding returns of goods and factor services to the government.
2.	Leads to the production of goods/services and adds to output.	No production; just redistribution of income to help people.
3.	The government gets something in return (e.g., services, infrastructure)	The government gets nothing in return (it's a one-way payment).
4.	Examples: Salaries to government employees, spending on infrastructure, and defence.	Examples: old-age pensions, unemployment benefits, and scholarships.