When the government incurs a revenue deficit, it implies that the government is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → dissaving and using the savings of other sectors to finance part of its consumption
A revenue deficit means revenue expenditure exceeds revenue receipts. The government is dissaving: it borrows the savings of other sectors to pay for part of its consumption. So it must borrow for its consumption needs too, not only for investment.
NCERT (2026-27): “5.2.1 Measures of Government Deficit … The revenue deficit includes only such transactions that affect the current income and expenditure of the government. When the government incurs a revenue deficit, it implies that the government is dissaving and is using up the savings of the other sectors of the economy to finance a part of its consumption expenditure. This situation means that the government will have to borrow not only to finance its investment but also its consumption requirements. …” |