GK
INDIAN ECONOMY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
printing new currency notes
|
|
|
public revenue in excess of public expenditure
|
|
|
public expenditure in excess of public revenue
|
|
|
replacing new currency with worn out currency
|
Detailed explanation-1: -The correct answer is Public expenditure in excess of public revenue. Deficit financing means generating funds to finance the deficit which results from an excess of expenditure over revenue. The gap is covered by borrowing from the public by the sale of bonds or by printing new money.
Detailed explanation-2: -In India, deficit financing is said to occur when the union government’s current budget deficit is covered by the withdrawal of the government’s cash balance and by borrowing money from the Reserve Bank of India.
Detailed explanation-3: -Impact of Deficit Financing It increases aggregate expenditure which in turn increases aggregate demand and hence the risk of inflation. Deficit Financing can also cause inflation. It also leads to the process of economic surplus which causes economic growth.
Detailed explanation-4: -The three sources of public revenue are tax revenue, non-tax revenue and foreign grants. 2) Public Expenditure: Public revenue collected from various sources is allocated for different purposes. Generally, it is classified into development expenditure and administrative expenditure.