In the traditional Indian monetary sense, deficit financing means meeting which gap through money creation?
Question and options
In the traditional Indian monetary sense, deficit financing means meeting which gap through money creation?
Expenditure exceeding currency in circulation
Failure to maintain a gold-backing ratio for note issue
State expenditure exceeding Union government expenditure
Expenditure exceeding current revenue and non-bank borrowing
Answer and explanation
Correct answer: D - Expenditure exceeding current revenue and non-bank borrowing
In the traditional Indian monetary sense, deficit financing covers the expenditure gap remaining after current revenue and non-bank borrowing through money creation. Comparing expenditure with the stock of currency does not define that gap.
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