Multiple choice

Which of the following is not a cause to adopt deficit financing?

  1. Increase in population

  2. Tax evasion

  3. Increase in non-productive expenses

  4. Political stability
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

This is not a valid reason for resorting to deficit financing. When there is political stability, the government does not change frequently. Thus, expenses on voting and elections are minimised and the government does not have to resort to deficit financing to meet the expenses on elections. In fact it reduces deficit financing. Thus, political stability is not the reason for resorting to deficit financing.

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