In India, deficit financing is used for raising resources for
- (a)economic development
- (b)redemption of public debt
- (c)adjusting the balance of payments
- (d)reducing the foreign debt
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Official answer(a) economic development
Other questions on Fiscal Policy & Budget
Which one of the following best describes the ‘Crowding Out Effect’ in the context of fiscal policy ?
- (a)A situation where private investment increases due to increased Government spending
- (b)A situation where Government borrowing leads to higher interest rates, which reduces private investment
- (c)A situation where an increase in taxes leads to increased private sector investment
- (d)A situation where Government spending has no impact on aggregate demand
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Official answer(b) A situation where Government borrowing leads to higher interest rates, which reduces private investment
Consider the following statements : I. Capital receipts create a liability or cause a reduction in the assets of the Government. II. Borrowings and disinvestment are capital receipts. III. Interest received on loans creates a liability of the Government. Which of the statements given above are correct?
- (a)I and II only
- (b)II and III only
- (c)I and III only
- (d)I, II and III
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Official answer(a) I and II only
A country's fiscal deficit stands at ₹ 50,000 crores. It is receiving ₹ 10,000 crores through non-debt creating capital receipts. The country's interest liabilities are ₹ 1,500 crores. What is the gross primary deficit?
- (a)₹ 48,500 crores
- (b)₹ 51,500 crores
- (c)₹ 58,500 crores
- (d)None of the above
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Official answer(a) ₹ 48,500 crores
Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct? I. It has recommended grants of ₹ 4,800 crores from the year 2022–23 to the year 2025–26 for incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes are to be shared with States. III. ₹ 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. IV. It reintroduced tax effort criteria to reward fiscal performance. Select the correct answer using the code given below.
- (a)I, II and III
- (b)I, II and IV
- (c)I, III and IV
- (d)II, III and IV
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Official answer(c) I, III and IV
Consider the following : 1. Demographic performance 2. Forest and ecology 3. Governance reforms 4. Stable government 5. Tax and fiscal efforts For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?
- (a)Only two
- (b)Only three
- (c)Only four
- (d)All five
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Official answer(b) Only three
Consider the following statements : The 'Stability and Growth Pact' of the European Union is a treaty that 1. limits the levels of the budgetary deficit of the countries of the European Union 2. makes the countries of the European Union to share their infrastructure facilities 3. enables the countries of the European Union to share their technologies How many of the above statements are correct?
- (a)Only one
- (b)Only two
- (c)All three
- (d)None
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Official answer(a) Only one