Question

What is the difference between revenue expenditure and capital expenditure? Explain how taxes and government expenditure can be used to influence distribution to income in the society.

Answer 1

Revenue expenditure does not lead to any change in assets or liabilities of the government whereas in capital expenditure it does.
Reducing inequalities in income and wealth:
Economic inequality is an inherent part of every economic system. Government aims to reduce such inequalities of income and wealth, through its budgetary policy. Government aims to influence distribution of income by imposing taxes on the rich and spending more on the welfare of the poor. It will reduce income of the rich and raise standard of living of the poor, thus reducing inequalities in the distribution of income.