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Consider the following statements:
1. Fiscal deficit is the difference between the Revenue Receipts and the total expenditure excluding Non-debt Capital Receipts (NDCR).
2. High Fiscal deficit boosts the demand and hence more private production.
2. High Fiscal deficit boosts the demand and hence more private production.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements:1. Fiscal deficit is the difference ...
Explanation:
Fiscal Deficit:
- Fiscal deficit is the difference between the total revenue receipts and the total expenditure of the government, excluding non-debt capital receipts.
- It represents the total amount of borrowed funds required by the government to meet its expenditure.
High Fiscal Deficit and Demand:
- High fiscal deficit does not necessarily boost demand. In fact, it can have negative consequences on the economy.
- A high fiscal deficit can lead to inflationary pressures as the government borrows more money, increasing the money supply in the economy.
- This can lead to an increase in prices, reducing the purchasing power of consumers.
- Additionally, high fiscal deficit can crowd out private investment as the government competes with the private sector for funds.
- This can lead to higher interest rates, making it more expensive for businesses to borrow and invest in production.
Conclusion:
- In conclusion, while the first statement about fiscal deficit is correct, the second statement that high fiscal deficit boosts demand and private production is not accurate. High fiscal deficit can have negative consequences on the economy and may not necessarily lead to increased private production.
Fiscal Deficit:
- Fiscal deficit is the difference between the total revenue receipts and the total expenditure of the government, excluding non-debt capital receipts.
- It represents the total amount of borrowed funds required by the government to meet its expenditure.
High Fiscal Deficit and Demand:
- High fiscal deficit does not necessarily boost demand. In fact, it can have negative consequences on the economy.
- A high fiscal deficit can lead to inflationary pressures as the government borrows more money, increasing the money supply in the economy.
- This can lead to an increase in prices, reducing the purchasing power of consumers.
- Additionally, high fiscal deficit can crowd out private investment as the government competes with the private sector for funds.
- This can lead to higher interest rates, making it more expensive for businesses to borrow and invest in production.
Conclusion:
- In conclusion, while the first statement about fiscal deficit is correct, the second statement that high fiscal deficit boosts demand and private production is not accurate. High fiscal deficit can have negative consequences on the economy and may not necessarily lead to increased private production.
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Consider the following statements:1. Fiscal deficit is the difference ...
In News: Finance minister in her budget speech has proposed a glide path for fiscal consolidation to bring down the fiscal deficit to 4.5% of GDP by FY26. She proposed to introduce amendments to the FRBM Act to make necessary changes in the fiscal consolidation roadmap.
Statement 1 is not correct: The Union Budget defines Fiscal Deficit as the difference between the Revenue Receipts plus Non-debt Capital Receipts (NDCR) and the total expenditure. In other words, it is reflective of the total borrowing requirements of the Government.
Statement 2 is not correct: In the economy, there is a limited pool of investible savings. These savings are used by financial institutions like banks to lend to private businesses (both big and small) and the governments. If the FD ratio is too high, it implies that there is a lesser amount of money left in the market for private entrepreneurs and businesses to borrow.
Statement 1 is not correct: The Union Budget defines Fiscal Deficit as the difference between the Revenue Receipts plus Non-debt Capital Receipts (NDCR) and the total expenditure. In other words, it is reflective of the total borrowing requirements of the Government.
Statement 2 is not correct: In the economy, there is a limited pool of investible savings. These savings are used by financial institutions like banks to lend to private businesses (both big and small) and the governments. If the FD ratio is too high, it implies that there is a lesser amount of money left in the market for private entrepreneurs and businesses to borrow.
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Consider the following statements:1. Fiscal deficit is the difference between the Revenue Receipts and the total expenditure excluding Non-debt Capital Receipts (NDCR).2. High Fiscal deficit boosts the demand and hence more private production.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?
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