Q1. Deficit Financing means
(a) Difference of total expenditure and income by revenue from all sources.
(b) Government spends in excess of revenues so that a budget deficit is incurred which is financed by the borrowings.
(c) Difference in borrowing and external and internal resources.
(d) Capital expenditure on items of public construction, public enterprises and public borrowings.
(UPSC Prelims 1987)
Answer: (b) Government spends in excess of revenues so that a budget deficit is incurred which is financed by the borrowings
Explanation: Deficit financing occurs when the government’s expenditure exceeds its revenue, and the gap is filled by borrowing or printing currency. It is used to stimulate economic growth, especially during recessionary periods.
Q2. Which of the following is the correct ascending order of contribution to domestic savings ?
(a) Household sector, Corporate sector, Private sector, Public enterprises
(b) Corporate sector, Household sector, Public enterprises, Government and Public enterprises
(c) Government and Public enterprises, Public enterprises, Household sector, Corporate sector
(d) Public enterprises, Corporate sector, Government and Public enterprises, Household sector
(UPSC Prelims 1987)
Answer: (d) Public enterprises, Corporate sector, Government and Public enterprises, Household sector
Explanation: In India, the household sector contributes the most to domestic savings, followed by government and public enterprises, corporate sector, and public enterprises.
The correct ascending order starts from the lowest contributor.