Economics 6 Marks Question

(i) i. Expenditure on scholarships is a revenue expenditure because it neither leads to a decrease in liabilities nor leads to an increase in assets.
ii. Expenditure on building a bridge increases the assets of the country therefore it is a capital expenditure.
(ii) 1. As food is basic necessity, so to provide affordable food to all the government provide subsidy on food.
2. Reducing inequalities in income and wealth is another important objective of government budget. By providing subsidy to food items and leaving taxes on luxury items, Government try to create economic equality.

i. Government final Consumption Expenditure = i - iii - vii - xi + v + viii - vi
= 7100 - 1000 - 4000 - 500 + 200 + 300 - 100
= ₹ 2,000 crores
Mixed Income of Self Employed = i - x - xii - vi
= 7100 - 1500 - 3000 - 100
= ₹ 2500 crores
As per given solution when we calculate GFCE, first we calculate gdp at mp or ndp at mp then we used expenditure method format.
Same as when we calculate Mixed Income then first we calculate ndp at fc then we used income method format.
ii. i. Exports will not be included in private final consumption expenditure as exports do not reflect consumption expenditure by residents.
ii. It will be included in private final consumption expenditure as such purchases are meant for consumption.
iii. It will be included in private final consumption expenditure as non-profit institutions serving households are a component of household sector.
iv. It will not be included in private final consumption expenditure as it is a component of capital formation.