Multiple choice

By which of the following policies does the value of rupee decrease?

  1. By increasing the taxes

  2. By adopting policy of public debt

  3. By adopting deficit financing

  4. By adopting surplus financing policy
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is by adopting deficit financing. When deficit financing is resorted, the government has to issue new currency notes to meet the deficit. When the new currency notes are issued, it increases supply of money in the market as compared to demand. Therefore, the price increases, and the value of rupee decreases.

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