Question

A key feature of exhaustive expenditure is that it:

• A. It is always funded through borrowing.
• B. It does not impact inflation levels.
• C. It is primarily focused on private sector investment.
• D. Leads to a direct claim on society's real resources.

Answer 1

Answer:

D. Leads to a direct claim on society's real resources.

• Exhaustive expenditure is when the government purchases goods and services (e.g., building a road, hiring a teacher), thereby "exhausting" or using up real resources from the economy.

• Transfer payments, in contrast, simply reallocate purchasing power.