Q. Which of the following is/are implication/s of increase in capital expenditure of the government?
1.Strengthens aggregate demand
2.Crowds-in private spending in times of risk aversion
3.Enhances the longer-term supply-side productive capacity
Choose the correct answer from below given codes:

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: D

Explanation: The Government’s thrust on Capital expenditure, particularly in the infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs, has longer-term implications for growth.

While on the one hand, capital expenditure strengthens aggregate demand and crowds-in private spending in times of risk aversion; it also enhances the longer-term supply-side productive capacity.

Source: Economic Survey 2022 – 23