Government has raised its expenditure on free sevices like education and health to the poor. Explain the economic value it reflects.

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Solution

Two observations can be made in this respect:

(i) Higher expenditure on health is expected to make our workforce strong and efficient. Rise in efficiency implies a rise in productivity. It is an index of economic growth.

(ii) Higher expenditure on education is expected to boost skill formation in the country. It facilitates the use of new technology. Application of new technology would raise the level of potential output. PPC of the economy would shift to the right.

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