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Trends: Budget & Fiscal Deficit Video Lecture | Indian Economy for UPSC CSE
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FAQs on Trends: Budget & Fiscal Deficit Video Lecture - Indian Economy for UPSC CSE
| 1. What is a budget deficit? |  |
Ans. A budget deficit occurs when a government spends more money than it receives in revenue during a specific period, usually a fiscal year. It is an indicator of financial imbalance and results in an increase in the government's overall debt.
| 2. What are the causes of a budget deficit? | |
Ans. There are several causes of a budget deficit. Some common factors include increased government spending on social welfare programs, defense, and infrastructure development, reduced tax revenues due to economic downturns or tax cuts, and ineffective fiscal policies that do not prioritize deficit reduction.
| 3. How does a budget deficit affect the economy? | |
Ans. A budget deficit can have both short-term and long-term impacts on the economy. In the short term, it can stimulate economic growth as increased government spending injects money into the economy. However, in the long term, it can lead to higher interest rates, inflation, and a burden of debt on future generations, potentially hindering economic growth and stability.
| 4. How can a country reduce its budget deficit? | |
Ans. There are several strategies a country can employ to reduce its budget deficit. These include cutting government spending, increasing tax revenues through tax reforms or raising tax rates, improving fiscal discipline and efficiency, promoting economic growth to boost tax receipts, and implementing structural reforms to reduce wasteful expenditures.
| 5. What are the consequences of a persistent budget deficit? | |
Ans. A persistent budget deficit can have serious consequences for a country's economy. It can lead to a growing national debt, which may become unsustainable and require external borrowing. This can result in higher interest payments, crowding out private investment, reduced confidence in the government's ability to manage finances, and potential credit rating downgrades, making it more expensive for the government to borrow in the future.
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Nov 17, 2024 Last updated |
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