Chapter 39, Problem 7MCQ

To determine

The question requires us to determine the spending by the government for improving human capital.

Explanation of Solution

Human capital is the skill, and knowledge possessed by humans to increase the economic value of the work done. Investment in human capital increases the level of economic growth of a nation.

An increase in government spending on human capital such as better education and health facilities, and higher spending on research & development will promote economic growth. For example, an improvement in educational facilities (such as providing courses according to the market demand for workers, opening training institutions, and so on) will help in reducing structural unemployment in the economy which helps in getting achieving economic growth.

Therefore, government spending on public education, research, and development is considered a human capital investment.

Option “b” and “c” are correct.

The other options are incorrect because

• The government spending on roads and bridges is spending on infrastructure development.
• Government spending on fossil fuels is not considered spending on human capital as it doesn’t increase the level of human capital in an economy.

Economics Concept Introduction

An increase in the aggregate production of goods and services in an economy over time is considered economic growth in a country. To promote economic growth, the government uses expansionary fiscal policies such as increasing fiscal spending on infrastructure, physical and human growth, and on research and development.