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Deficits - Economics, UPSC IAS Exam Preparation Video Lecture | Indian Economy (Prelims) by Shahid Ali
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FAQs on Deficits - Economics, UPSC IAS Exam Preparation Video Lecture - Indian Economy (Prelims) by Shahid Ali
| 1. What is a deficit in economics? |  |
Ans. In economics, a deficit refers to a situation where expenses exceed revenues or when a country imports more than it exports, leading to a negative balance of trade. It can also refer to a shortfall or lack of a particular resource or commodity.
| 2. How does a deficit affect the economy? | |
Ans. A deficit can have various effects on the economy. It can lead to increased borrowing, which can raise interest rates and reduce private investment. It can also result in inflation if the deficit is financed by printing more money. Additionally, a deficit can lead to a decrease in the value of the country's currency and impact the balance of trade.
| 3. What are the causes of a fiscal deficit? | |
Ans. A fiscal deficit is caused by a mismatch between government spending and revenue. It can be caused by factors such as increased government expenditure, tax cuts, economic recession, or structural issues in the economy. Additionally, external factors like changes in global commodity prices or interest rates can also contribute to a fiscal deficit.
| 4. How can a government reduce a fiscal deficit? | |
Ans. Governments can adopt various measures to reduce a fiscal deficit. They can increase taxes, reduce government expenditure, implement austerity measures, or promote economic growth to increase revenue. Governments can also consider privatization of state-owned enterprises, reducing subsidies, or implementing structural reforms to improve fiscal discipline and reduce deficits.
| 5. What are the consequences of a trade deficit? | |
Ans. A trade deficit occurs when a country imports more goods and services than it exports. Consequences of a trade deficit can include a decrease in domestic employment, as domestic industries may struggle to compete with imported goods. It can also lead to a decrease in the value of the country's currency and a decrease in the country's overall economic output. Additionally, a trade deficit can result in an increased reliance on foreign borrowing and can impact the balance of payments.
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Nov 21, 2024 Last updated |
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