Which statement best describes the difference between a capital expenditure and a current expenditure?
Correct answer: A. Capital expenditure creates or improves assets, while current expenditure supports routine operations
- A. Capital expenditure creates or improves assets, while current expenditure supports routine operations
- B. Capital expenditure is always financed by taxes, while current expenditure is always borrowed
- C. Capital expenditure is paid to households, while current expenditure is paid only to firms
- D. Capital expenditure reduces public assets, while current expenditure increases them
Explanation
Capital expenditure normally creates, acquires or improves long-term public assets, such as roads and schools. Current expenditure covers recurring operations, including salaries, maintenance and administration.
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About Public Finance
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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