wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

Are fiscal deficits necessarily inflationary?

Open in App
Solution

Yes. If a fiscal deficit is financed by issuing new currency, it will increase inflation. It may be worsened if the new currency is used to finance the current consumption expenditure of the government. If new money is used for infrastructural activities or other capital projects, the fiscal deficit will not be inflationary.


flag
Suggest Corrections
thumbs-up
31
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Debts and Deficits
ECONOMICS
Watch in App
Join BYJU'S Learning Program
CrossIcon