Government Spending & the Budget is one of 9 topics in the Grade 12 Economics CAPS syllabus, covered across 3 lessons on Study Vault. Below are real practice questions from this topic with full worked answers.
Sample practice questions
Easy
1. Social grants, such as old age pensions and child support grants, are classified as which type of government spending?
Current expenditure (a transfer payment)
Capital expenditure
Debt-service cost
Foreign direct investment
Answer: Current expenditure (a transfer payment) — Social grants are transfer payments paid directly to households without government receiving a good or service in return, and are classified as current expenditure.
Easy
2. Government spending on building new roads, schools and hospitals is classified as:
Capital expenditure
Current expenditure
A budget surplus
A transfer payment
Answer: Capital expenditure — Spending on long-lived physical assets that expand productive capacity, such as roads, schools and hospitals, is classified as capital expenditure (investment spending).
Medium
3. What term describes government payments made directly to individuals or households, such as social grants, where government receives no good or service in return?
Answer: A transfer payment — Transfer payments, such as social grants and pensions, are payments made without government receiving a good or service in exchange, distinguishing them from spending on goods, services or wages.
