Identify the correct statements from the following.
(A) Borrowings are non-debt creating capital receipt.
(B) Revenue deficit is same as borrowings of the government.
(C) When a government spends more than it collects by way of revenue, it incurs a budget deficit.
(D) The revenue deficit includes only such transactions that affect the current income and expenditure of the government.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (C) and (D) only
(C) When a government spends more than it collects by way of revenue, it incurs a budget deficit. — True. A budget deficit arises when total expenditure exceeds total revenue.
(D) The revenue deficit includes only such transactions that affect the current income and expenditure of the government. — True. Revenue deficit concerns only revenue receipts and revenue expenditure, which are current in nature.
(A) Borrowings are non-debt creating capital receipt. — False. Borrowings are debt-creating capital receipts because they create future repayment liability.
(B) Revenue deficit is same as borrowings of the government. — False. Revenue deficit measures excess of revenue expenditure over revenue receipts, while borrowings are a source of capital receipts used to finance deficits.