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Government Spending as a Tool

Giving reason...

Question

Giving reasons, explain how the following are treated in estimating national income:
Expenditure by government on providing free education.
All India 2008 paper
How this is included in national income? Though it is final expenditure, the government receives no IMMEDIATE benefit, right?

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Solution

Yes, the government receives no immediate benefit by providing free education. But, expenditure incurred on provision of free education is a kind of investment in the development of the economy. Such expenditure gives returns to the government in the long run. Hence, it is included in national income.

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