Question

Deficit financing __________.

• A. puts purchasing power in people's hands
• B. does not create real resources in economy
• C. both (a) & (b) are true
• D. none is true

Answer 1

The correct option is C both (a) & (b) are true

Deficit financing is a situation in which the government spends more than the revenue it earns, the difference being made up by the borrowing and minting new funds. The effects of deficit financing are;

1. It puts purchasing power in people's hands.
2. It does not create real resources in economy.