Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Government Budget and Economy

Question:

In order to meet a deficit in the budget government follows certain strategies, which of the following strategies would lead to an increase in the money supply in the economy?

Options:

Loan from IMF

Deficit financing

Disinvestment

All of the above

Correct Answer:

All of the above

Explanation:

Loan from IMF, Deficit financing (methods used by government to finance the budget deficit) and disinvestment would increase the supply of money in the economy.

Loan from IMF - would bring money INTO the economy.

Deficit financing -  for example: printing of new currency would also INCREASE the money flow into the economy.

Disinvestment: withdrawal or reduction in the investment will also INJECT money in the economy.