Question

Explain two reasons why a decreased recurrent expenditure leads to more cpaital expenditure..​

Answer 1

The reasons why recurrent expenditure decrease leads to capital expenditure increase :

1. Long term growth :

The decrease in current expenditure leads to decrease in current income, a country cannot survive for long in constant decrease thus future prospect growth is importation which leads to increased capital expenditure.

2. Budget :

If the government of the country decreases their proportion of recurrent expenditures from the budget they have to increase the capital expenditures otherwise all the excess money will go into vain.