Deficit financing means: MCQ with Answer and Explanation

Question
Deficit financing means:
A. financing government expenditure through borrowing or money creation
B. reducing government expenditure
C. repayment of public debt
D. financing government expenditure through taxation
Answer: Option A
Solution (By JKSSB Mock Tests)
Deficit financing involves financing a budget deficit through borrowing or creation of money.
This question belongs to: Economy GK Economy Set 1
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Practice More Economy Set 1 Questions

Question #1
The 'Employees' State Insurance Act' was enacted in which year?
A. 1947
B. 1952
C. 1950
D. 1948
Discuss
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Correct Answer: Option D

Explanation:
Employees' State Insurance Act was enacted in 1948.
This question belongs to: Economy GK Economy Set 1
Question #2
In the context of public economics, 'Pigouvian Taxes' are designed to:
A. Subsidise positive externalities only
B. Raise revenue without affecting behaviour
C. Only redistribute income
D. Internalise negative externalities by setting the tax equal to marginal external cost
Discuss
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Correct Answer: Option D

Explanation:
A Pigouvian tax is levied on an activity that generates a negative externality and is set equal to the marginal external damage at the socially optimal quantity, thereby aligning private and social costs.
This question belongs to: Economy GK Economy Set 1
Question #3
In the context of inflation measurement, the GDP deflator is:
A. The ratio of nominal GDP to real GDP
B. A measure of wholesale prices only
C. A measure of consumer price changes only
D. A fixed-basket consumer price index
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Correct Answer: Option A

Explanation:
The GDP deflator is calculated as (Nominal GDP / Real GDP) × 100 and reflects price changes of all goods and services produced domestically.
This question belongs to: Economy GK Economy Set 1
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