ECONOMICS
ECONOMIC DEVELOPMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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May lead to corruption and public funds being used for private gain
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May lead to an increased budget deficit and an increase in the levels of national debt.
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May lead to an increased budget surplus and an increase in the levels of national debt.
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May lead to diseconomies of scale
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Detailed explanation-1: -Since market demand will exceed market supply, deficit financing can lead to inflation, that is, a rise in the prices of all commodities. Excessive dependence of a country on debt can hamper economic growth in the long term.
Detailed explanation-2: -Increase aggregate demand A budget deficit implies a reduction in taxes and an increase in government spending, which results in an increase in the aggregate demand of the country and subsequent economic growth, ceteris paribus.
Detailed explanation-3: -If there is an increase in the fiscal deficit, it can actually boost a sluggish type economy by providing more money to the people, thereby they can now buy and invest even more. However, deficits for a longer time will be detrimental to the overall economic growth.
Detailed explanation-4: -Reduces Quality. There are only so many quality companies and even less that are priced at levels that provide a margin of safety. Too Complicated. Indexing. Market Risk. Below Average Returns. Bad Investment Vehicles. Lack of Focus or Attention to Your Portfolio.