Question

Which of the following is NOT an example of capital expenditure incurred by the government?

• A. Expenditure on maintenance of a government school building
• B. Repayment of loans by the government
• C. Expenditure on construction of a new hospital
• D. Loans given by the government

Answer 1

The Correct Option is A

In economics, capital expenditure signifies funds allocated by a government for the acquisition, enhancement, and upkeep of tangible assets, including structures, infrastructure, and machinery. Such expenditures typically yield future economic advantages and are viewed as investments in enduring resources.

An examination of each option follows:

• Maintenance of a government school building: This qualifies as revenue expenditure, as it pertains to the upkeep of existing infrastructure rather than the creation or acquisition of new assets. It does not confer long-term benefits or future economic value.
• Repayment of government loans: While involving financial transactions, this is categorized as a fiscal outflow associated with public financial management and is not directly linked to the creation or improvement of capital assets.
• Construction of a new hospital: This constitutes capital expenditure due to the creation of a new asset that will deliver health services and benefits over an extended duration.
• Government-provided loans: These are frequently classified as capital expenditures when they are treated as investments anticipated to generate returns or future benefits.

Conclusion: Expenditure on maintaining a government school building is not classified as capital expenditure because it does not lead to the establishment of new capital assets. Its purpose is the preservation of current infrastructure.