Question

Deficit financing means that the government borrows money from the ______.

• A. RBI
• B. local bodies
• C. corporate houses
• D. IMF

Answer 1

The correct option is A RBI

Deficit financing is a method of meeting government deficits through the creation of new money. The deficit is the gap caused by the excess of government expenditure over its receipts. The expenditure includes disbursement on revenue as well as on capital account. At the time of deficit financing government borrows money from the RBI.

Hence, option (A) is the correct answer.