Question

Statement (1): Public expenditure on interest payments is considered as an unproductive expenditure.

Statement (2): Public expenditures on investment are productive.

Options

• Both statements are true.

• Both statements are false.

• Statement 1 is true but Statement 2 is false.

• Statement 2 is true but Statement 1 is false.

Answer 1

Both statements are true.

Explanation:

Both statements are true Because government spending on interest payments only serves existing liabilities without building new infrastructure, it is classified as non-asset-creating (unproductive) revenue expenditure. In contrast, government investments in capital assets actively enhance the country’s industrial and economic foundations, resulting in highly productive expenditures.