Question

Which of the following would be classified as a revenue expenditure of the government?

• A. Investment in the construction of a new highway.
• B. Purchase of land for building a school.
• C. Salaries paid to government employees.
• D. Loans granted by the government to public sector undertakings.

Hint:

Revenue expenditure involves spending on day-to-day operations, such as salaries, while capital expenditure involves investment in assets like infrastructure.

Answer 1

The Correct Option is C

Revenue expenditure refers to the government's spending on items that do not lead to the creation of new assets but are used to maintain existing ones.
The correct option here is (3): salaries paid to government employees. This is considered a revenue expenditure because it is a recurring cost that does not contribute to the creation of physical assets but is necessary for the functioning of the government.
On the other hand, investments like the construction of a highway or the purchase of land are classified as capital expenditures, as they involve the creation of assets. Loans granted to public sector undertakings are also considered capital expenditure.
Therefore, the correct classification is salaries paid to government employees.