Home › CBSE Class 12 (Arts) › Economics › Government Budget and the Economy › A high fiscal deficit need not be inflationary w…
A high fiscal deficit need not be inflationary when
AUnutilised resources exist
BThe money supply is cut
CFull employment prevails
DTaxes are cut very sharply
Answer & Solution
Correct answer: A. Unutilised resources exist
With idle resources, output is held back by weak demand, so extra demand raises output rather than prices.
Related questions
Since 1997-98, which deficit measure has no longer been shown in India's budget?A common criticism of deficits is that they areWithout any change in fiscal policy, the budget deficit tends toDebt owed to foreigners is a real burden becauseGovernment bonds competing with corporate bonds for savings can push out private borrowersUnder Ricardian equivalence, higher government dissaving from a deficit leads toWho first argued that people save more when faced with high deficits, giving Ricardian equDeficits are a flow while government debt is a