Revenue & Capital Expenditure MCQs
Revenue & Capital Expenditure – MCQs with Answers & Explanations
Class: CBSE Class 12
Subject: Economics
Section: Government Budget and the Economy — Introductory Macroeconomics
Topic: Revenue & Capital Expenditure
Exam Focus: CBSE Board Examinations
Subject: Economics
Section: Government Budget and the Economy — Introductory Macroeconomics
Topic: Revenue & Capital Expenditure
Exam Focus: CBSE Board Examinations
These Multiple Choice Questions (MCQs) are designed strictly as per the NCERT syllabus, making them ideal for CBSE Class 12 Board Examination preparation. Each answer includes a detailed concept-clearing explanation.
1. Revenue expenditure refers to expenditure which:
Answer: (c)
Revenue expenditure is incurred for normal functioning of government departments like salaries, subsidies, pensions etc. It does not create assets.
2. Payment of salaries to government employees is:
Answer: (b)
Salaries are recurring expenses for administration and do not create assets, hence revenue expenditure.
3. Construction of highways is classified as:
Answer: (b)
It leads to creation of physical assets, so it is capital expenditure.
4. Capital expenditure results in:
Answer: (c)
Capital expenditure either creates assets (roads, buildings) or reduces liabilities (loan repayment).
5. Subsidies given by government are:
Answer: (b)
Subsidies are transfer payments for welfare; they do not create assets.
6. Repayment of public debt is:
Answer: (b)
Loan repayment reduces government liabilities, hence capital expenditure.
7. Expenditure on defence salaries is:
Answer: (b)
Salaries are recurring administrative expenses → revenue expenditure.
8. Purchase of machinery by government is:
Answer: (b)
Machinery purchase creates productive assets → capital expenditure.
9. Interest payments on loans are:
Answer: (b)
Interest is a recurring obligation and does not reduce principal liability.
10. Which is NOT revenue expenditure?
Answer: (c)
Road construction creates assets → capital expenditure.
11. Grants given to states are generally:
Answer: (b)
They are transfer payments without asset creation.
12. Expenditure on education infrastructure is:
Answer: (b)
Building schools/colleges creates assets → capital expenditure.
13. Maintenance of government buildings is:
Answer: (b)
Maintenance preserves assets but does not create new ones.
14. Capital expenditure is usually:
Answer: (b)
It occurs occasionally for long-term asset creation.
15. Expenditure increasing future productivity is:
Answer: (b)
Capital expenditure builds infrastructure and productive capacity.
16. Old age pensions are:
Answer: (b)
They are welfare transfer payments.
17. Investment in PSUs is:
Answer: (b)
It creates financial assets for government.
18. Free ration distribution is:
Answer: (b)
It is consumption expenditure for welfare.
19. Which reduces government liability?
Answer: (b)
Repaying principal reduces outstanding debt.
20. Basis of classifying expenditure is:
Answer: (b)
If assets are created or liabilities reduced → Capital; otherwise → Revenue.