Multiple choice

Which of the following is the biggest ill-effect of deficit financing for an economy?

  1. Increase in wasteful expenses

  2. Increase in inequality

  3. Increase in cost of projects

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is the biggest ill-effect of deficit financing. There is inflationary pressure at the time of deficit financing that makes the rich richer and the poor poorer. The fix wage earners are badly affected as their wages are not increased and their standard of living goes down. Thus, the gap between the rich and the poor widens, and thus there is increase in inequalities that is the biggest ill-effect of deficit financing because it is an injustice for an economy.

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