Which outcome is most likely when public expenditure on basic education increases substantially?
Correct answer: A. Greater human capital formation
- A. Greater human capital formation
- B. Lower productive capacity in the long run
- C. A permanent fall in labour participation
- D. A complete removal of income inequality
Explanation
Spending on basic education can improve skills, productivity, and future earning capacity, so it contributes to human capital formation. It may reduce inequality, but it cannot by itself eliminate inequality completely.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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