Deficit financing creates additional paper currency to fill the gap between expenditure and revenue. This device aims at economic development. But if it fails, it generates ______________.
Deficit financing creates additional paper currency to fill the gap between expenditure and revenue. This device aims at economic development. But if it fails, it generates ______________.
The correct option is D inflation
Ans. D
Now, in spite of the fact that large resources can
be raised through both taxation and loans, a wide gap may remain between the
government receipts and expenditures. The successful operation and the
execution of war programmes requires a thorough regimentation of both the
civilian and military sectors, which, of course, presupposes the command over
huge amount of real as well as monetary resources. The balancing of the budget
is impossible under this situation. The only course open to a -government under
such circumstances is, therefore, to raise finance by printing notes or by
securing the creation in its favour of bank credits, or by a combination of
these two devices; in short, by the method of deficit financing.
Ans. D
Now, in spite of the fact that large resources can be raised through both taxation and loans, a wide gap may remain between the government receipts and expenditures. The successful operation and the execution of war programmes requires a thorough regimentation of both the civilian and military sectors, which, of course, presupposes the command over huge amount of real as well as monetary resources. The balancing of the budget is impossible under this situation. The only course open to a -government under such circumstances is, therefore, to raise finance by printing notes or by securing the creation in its favour of bank credits, or by a combination of these two devices; in short, by the method of deficit financing.
