Consider the following statements about government debt:
(A) One aspect of the debt issue is whether government debt is a burden, and the other is the financing of the debt.
(B) What is true of one small trader’s debt may not be true of the government’s debt.
(C) Unlike any one trader, the government can raise resources through taxation and printing money.
(D) By borrowing, the government transfers the burden of reduced consumption on the present generation.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
The debt issue has two parts: whether debt is a burden, and how it is financed.
(A) One aspect of the debt issue is whether government debt is a burden, and the other is the financing of the debt. — Correct. These are the two linked aspects.
(B) What is true of one small trader’s debt may not be true of the government’s debt. — Correct. The whole must be treated differently from the part.
(C) Unlike any one trader, the government can raise resources through taxation and printing money. — Correct. A trader cannot tax or print money.
(D) By borrowing, the government transfers the burden of reduced consumption on the present generation. — Incorrect. The burden falls on future generations, who pay the taxes when the bonds are repaid.
NCERT (2026-27): “Perspectives on the Appropriate Amount of Government Debt: There are two interlinked aspects of the issue. One is whether government debt is a burden and two, the issue of financing the debt. The burden of debt must be discussed keeping in mind that what is true of one small trader’s debt may not be true for the government’s debt, and one must deal with the ‘whole’ differently from the ‘part’. Unlike any one trader, the government can raise resources through taxation and printing money.” “By borrowing, the government transfers the burden of reduced consumption on future generations. This is because it borrows by issuing bonds to the people living at present but may decide to pay off the bonds some twenty years later by raising taxes. These may be levied on the young population that have just entered the work force, whose disposable income will go down and hence consumption. …” |