(i) Public expenditures are income generating and include all types of government expenditure such as capital expenditure on public works, relief expenditures, subsidy payments of various types, transfer payments and other social security benefits. Government may spend money on performance of its large and ever-growing functions and also for deliberately bringing in Income equality. it initiate a fresh wave of public works, such as construction of roads, irrigation facilities, sanitary works, ports, electrification of new areas etc. Government expenditure involves employment of labour as well as purchase of multitude of goods and services and with the help of progressive tax system, it try to eliminate income inequality.
(ii) Public expenditure is also used as a policy instrument to reduce the severity of inflation and to bring down the prices. This is done by reducing government expenditure when there is a **** of inflationary rise in prices. Reduced incomes on account of decreased public spending helps to eliminate excess aggregate demand and help to correct inflationary situation in economy.
