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In the context of the Indian economy, what does the term “deficit financing” refer to

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In the context of the Indian economy, what does the term “deficit financing” refer to?

(a)

Financing by the Central Government to cover the deficit in the current account of the balance of payments.

(b)

Financing by the Central Government to cover the fiscal deficit by borrowing from the market.

(c)

Financing by the State Governments to cover their revenue deficit.

(d)

Financing by private corporations to cover their financial losses.

Answer:

(b)

Core Books/NCERT

Explanation

Deficit financing refers to the Central Government’s practice of borrowing from the market to cover the fiscal deficit, i.e., the gap between government expenditure and revenue.