ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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expand the economy due to an increase in AD.
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contract the economy due to a fall in AD.
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a fall in national debt.
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a fall in inflation in the country.
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Detailed explanation-1: -A budget deficit can lead to higher levels of borrowing, higher interest payments, and low reinvestment, which will result in lower revenue during the following year.
Detailed explanation-2: -Revenue deficit has the following impacts on the economy. Reduction in assets: For meeting the shortfall in the form of revenue deficit, the government has to sell some assets. It leads to the conditions of inflation in the economy. A large amount of borrowing leads to a greater debt burden on the economy.
Detailed explanation-3: -The budget deficit happens when the government expenditure exceeds its generated revenue and collected taxes. In short, revenue generation + taxes > expenditure.
Detailed explanation-4: -A budget deficit or deficit financing occurs when the estimated government expenditures increase more than the estimated government revenue. Such differences may be met by either increasing the tax rate or imposing the higher price of goods and public utility services.