GK
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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government expenditure leads to increase in the aggregate supply in ratio of aggregate demand
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only aggregate demand is increased
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all the expenditure is denoted national debt payment only
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none
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Detailed explanation-1: -Deficit financing leads to inflation in general, but it can be checked if government expenditure leads to increase in the aggregate supply in ratio of aggregate demand, only aggregate demand is increased and all the expenditure is denoted national debt payment only.
Detailed explanation-2: -deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.
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.