Question

What does the government do if it does not have enough public revenue to meet its public expenditures?

Answer 1

Instructions:

• Explain public debt and types of public debt - internal debt and external debt.

Answers:

• When public revenue is not insufficient to meet public expenditure, governments resort to borrowing which is known as public debts.
• Public debts are loans taken by the government. Based on where the loans are availed, there are two types of public debts - Internal debt and external debt.
• Internal debt is the loans availed by the government from individuals and institutions within the country. For example, a loan borrowed by the Indian government from the RBI.
• External debt is the loans availed from foreign governments and international institutions. For example, a loan borrowed by the Indian government from the World Bank or International Monetary Fund.