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A large revenue deficit as a share of fiscal deficit signals that borrowing is financing mainly
Ainvestment rather than consumption
Btax refunds to companies
Crepayment of foreign loans
Dconsumption rather than investment
Answer & Solution
Correct answer: D. consumption rather than investment
1. Fiscal deficit is total borrowing; revenue deficit is the current-account part of it.
2. If the revenue portion is large, most borrowed money is funding day-to-day spending.
3. That means borrowing is financing **consumption rather than investment**.
4. Borrowing for investment builds assets that can service the debt; borrowing for consumption does not, which is why the ratio is watched.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 5 "Government Budget and the Economy", section 5.2.1 Measures of Government Deficit_
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