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Measures of Government Deficit Video Lecture | Economics CUET Preparation - Commerce

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FAQs on Measures of Government Deficit Video Lecture - Economics CUET Preparation - Commerce

1. What is a government deficit?
Ans. A government deficit refers to the amount by which a government's total expenditures exceed its total revenues in a given period, typically a fiscal year. It represents the shortfall in funds that the government needs to borrow or print money to cover.
2. How is government deficit measured?
Ans. The government deficit is measured using various indicators, including the budget deficit, the primary deficit, and the fiscal deficit. The budget deficit is calculated by subtracting total government revenues from total government expenditures. The primary deficit is the budget deficit excluding interest payments on outstanding debt, while the fiscal deficit also includes interest payments.
3. What are the consequences of a government deficit?
Ans. A government deficit can have both short-term and long-term consequences. In the short term, it can stimulate economic growth through increased government spending. However, it can also lead to inflation, higher interest rates, and a weaker currency. In the long term, persistent deficits can result in a growing debt burden, reduced investment, and decreased confidence in the government's ability to manage its finances.
4. How does a government finance its deficit?
Ans. Governments finance their deficits through various means, including borrowing from domestic and international markets, issuing government bonds, and printing money. Borrowing from domestic and international sources involves selling bonds or securities to investors, who then lend money to the government in exchange for regular interest payments. Printing money, also known as monetizing the deficit, can lead to inflation if not managed carefully.
5. What measures can a government take to reduce its deficit?
Ans. Governments can implement several measures to reduce their deficits. These measures include reducing government spending, increasing tax revenues, improving tax collection efficiency, implementing fiscal reforms, and promoting economic growth. Additionally, governments may also consider measures such as privatization, reducing subsidies, and implementing austerity measures to control their deficits. However, the appropriate mix of measures depends on the specific economic and political context of each country.
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