Question

Explain two ways by which public expenditure promotes economic development.

State any two ways in which an increase in public expenditure promotes economic development.

State any three ways in which an increase in public expenditure promotes economic development.

Answer 1

Public expenditure significantly contributes to economic development in the following ways:

1. It directly fosters economic growth by building economic and social infrastructure and by setting up industries that produce capital goods.
2. It indirectly encourages development by offering facilities for education, training, and research.
3. Through subsidies, public expenditure can support and boost the growth of agriculture and industry.

Answer 2

1. Development of Infrastructure: Public expenditure on roads, railways, power, irrigation, and communication helps build economic infrastructure, which is essential for the smooth functioning of industries and agriculture. This leads to increased productivity and growth in the economy.
2. Investment in Human Capital: Government spending on education, healthcare, and skill development improves the quality of the labor force. A healthy and educated population contributes more effectively to national output, thus promoting long-term economic development.