Question

More government expenditure on non-developmental activities __________ inflation.

• A. increase
• B. decrease
• C. has no relation to
• D. none of the above

Answer 1

The correct option is A increase

According to recent Reserve Bank of India(RBI) report, approximately 45% of the government expenditure in India is on non-developmental activities which just increases the monetary supply in the economy but does not increase the overall production of goods and services in the economy due to which there is only rise in aggregate demand due to which the general price level rises in the economy owing to excess demand which increases inflation in the economy,