Multiple choice

Which of the following is not an objective of deficit financing?

  1. To finance war expenses

  2. Economic development

  3. To reduce inflation

  4. To overcome low tax receipts
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is not an objective of deficit financing. When the deficit financing is adopted, the new currency notes are issued and it leaves more cash in the hands of people. Thus, people demand and consume more, and this pushes up prices. Therefore, reducing inflation is not the objective of deficit financing. In fact, it is resorted to for overcoming depression.

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