Question

Which of these public expenditure is not a ‘transfer expenditure’?

Options

• old-age pension

• interest paid on government debt

• expenditure incurred on defence

• expenditure incurred in providing sickness benefit to the government employees.

Answer 1

expenditure incurred on defence

Explanation:

• Transfer expenditures are payments made by the government without receiving any goods or services in return (e.g., pensions, interest, sickness benefits).
  
• Defence expenditure is not a transfer expenditure because the government receives services (national security) in return.