Deficit financing aims to put more money into the economy by creating additional paper currency to fill the gap between expenditure and revenue. The device aims at economic development but if it fails, it generates _____.

inflation

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deflation

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devaluation

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demonetisation

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Solution

The correct option is A inflation
Deficit financing aims to put more money into the economy by creating additional paper currency to fill the gap between expenditure and revenue. The device aims at economic development but if it fails, it generates inflation.

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Similar questions

With reference to the Green Climate Fund (GCF), consider the following statements:

1. It is a fund within the framework of Rio+20 conference.

2. It aims to redistribute money from developed and developing countries to the Least Developed Countries.

List-I (Type of budget deficit)	List-II (Measurement of deficit)
A. Revenue Deficit	$1$ . Gap between total expenditure and total receipts
B. Fiscal Deficit	$2$ . Excess of revenue expenditure over revenue receipts
C. Primary Deficit	$3$ . Fiscal deficit less interest payments
D. Budgetary Deficit	$4$ . Difference between revenue receipts plus certain non-debt capital receipts and the total expenditure including loans, net of repayments

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