Which of the following is TRUE regarding the inclusion of government expenditure in GDP by the expenditure method?

hard Q10 of 15

Economic Awareness - Sectors of Indian Economy

AOnly capital expenditure by government is included, revenue expenditure is excluded

BBoth capital and revenue expenditures on goods and services are included, excluding transfer payments

CGovernment expenditure on transfer payments is included as investment

DGovernment borrowing is included as government expenditure

Step-by-Step Solution

Step 1: Understand government expenditure components
Government expenditure includes both capital and revenue spending on goods and services.
Step 2: Exclude transfer payments and borrowing
Transfer payments are excluded as they do not reflect production. Government borrowing is a financing activity, not expenditure.
Step 3: Analyze options
Only the statement that includes both capital and revenue expenditure excluding transfer payments is correct.
Final Answer:
Both capital and revenue expenditures on goods and services are included, excluding transfer payments → Option B
Quick Check:
Government expenditure in GDP = capital + revenue excluding transfers ✅

Quick Trick: Remember transfer payments and borrowing are excluded from government expenditure in GDP.

Common Mistakes:

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