Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Government Budget and Economy

Question:

Which of the following options tells us the way through which the government can finance the budgetary deficit?

Options:

Initiating the process to borrow

Disinvestment

Deficit financing  

All of the above

Correct Answer:

All of the above

Explanation:

Budgetary deficits occur when the government expenditure exceeds the receipts. In order to fill the gap we can do the following:

  1. Borrowings: The government can borrow from RBI against securities.
  2. Disinvestment: The government can sell of its assets (Public enterprises) partially or fully in order to manage the deficit.
  3. Deficit financing: As, the name suggests it means to finance the deficit of the government.