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Question

Q. Consider the following statements:
1. An increase in government borrowing can adversely affect private borrowing
2. An increase in capital expenditure of the government can stimulate private investment
Which of the statements given above is/are correct?

Q. निम्नलिखित कथनों पर विचार करें:
1. सरकार के ऋण में वृद्धि निजी ऋण पर प्रतिकूल प्रभाव डाल सकती है।
2. सरकार के पूंजीगत व्यय में वृद्धि निजी निवेश को प्रोत्साहित कर सकती है।
ऊपर दिए गए कथनों में कौन सा/से सही है / हैं?

A



1 only
केवल 1

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B

2 only
केवल 2
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C

Both 1 and 2
1 और 2 दोनों
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D


Neither 1 nor 2
न तो 1 और न ही 2
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Solution

The correct option is C
Both 1 and 2
1 और 2 दोनों
Statement 1 is correct
Increase in government borrowing can crowd out private borrowing

Statement 2 is correct
An increase in government spending in infrastructure and other productive avenues can stimulate private investment

Additional Information
Quantitative easing (allowing private firms to access more funds by lowering the interest rates) can stimulate an economy while austerity measures(cutting government spending) can promote the fiscal health of an economy. Government expenditure on capital goods like infrastructure can create jobs and encourage private investment.

कथन 1 सही है: सरकार के उधार में वृद्धि से निजी उधार लेने वालों को पूँजी की कमी पड़ जाती है ।

कथन 2 सही है : बुनियादी ढांचे में सरकारी खर्च में बढ़ोतरी और अन्य उत्पादक रास्ते निजी निवेश को प्रोत्साहित कर सकते हैं।

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