Question

Differentiate between the following terms:(i) Current Expenditure and Capital Expenditure (ii) Analyze the impact of the...

Differentiate between the following terms:(i) Current Expenditure and Capital Expenditure (ii) Analyze the impact of the two types of spending in (i) above on the economy of Ghana (b) “Managing the Public Sector debt is often one of the daunting challenges faced by the Government of Ghana” Required: (i) With example explain the term Public debt Mention and explain (3) three measures each that the Minister of Finance can recommend to Cabinet to manage public debt if the challenges faced relate to(i) Internal debt (ii) External debt

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Answer #1

1.Difference between Current Expenditure and Capital Expenditure

Current expenditures(Recurrent expenditure) refers to short term spending that is fully expensed in the fiscal period in which it is incurred.It does not result in creation or aquisition of fixed assets.They are in contrast to capital expenditure,which refers to spending on long term assets that are capitalized and amortized over their useful life.

ii)Ghana experienced fluctuating trends in economic growth since it gained independence.In both long run and short run,government capital expenditure has a significant negative impact on economic growth but recurrent expenditure has a positive effect on economic growth in both long run and short run though it is not significant in the short run.

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