Which of the following statement is correct regarding money received by the government from loans and the sale of its own assets?
Show answer & explanation
Correct answer: A
Explanation
Capital Receipts -
Loans: When the government borrows money, it is obligated to repay it with interest in the future. Therefore, loans create a liability for the government.
Sale of Assets: Also called 'disinvestment'. When the government sells its assets, it receives money but does not have to return it. Therefore, this does not create a liability, but rather reduces the government's assets.
Loans: When the government borrows money, it is obligated to repay it with interest in the future. Therefore, loans create a liability for the government.
Sale of Assets: Also called 'disinvestment'. When the government sells its assets, it receives money but does not have to return it.
Therefore, this does not create a liability, but rather reduces the government's assets.