Fiscal Deficit Quiz

Fiscal deficit occurs when a government's total expenditures exceed its total revenue. It indicates the amount of borrowing required by the government to meet its expenditure. It is significant in the economy as it reflects the government's financial health and can impact interest rates, inflation, and overall economic stability.

The structure of a fiscal deficit is influenced by various factors such as government spending on subsidies, social welfare programs, defense, infrastructure, and interest payments on past borrowings. Additionally, revenue generation through taxes, duties, and other sources also plays a crucial role in determining the structure of the fiscal deficit.

A high fiscal deficit can lead to various consequences such as increased government borrowing, which can crowd out private investment, higher interest rates, inflationary pressures, and a risk of sovereign debt default. It can also impact the country's credit rating and lead to a loss of investor confidence, ultimately affecting long-term economic growth and stability.

<p>John Maynard Keynes</p> Signup and view all the answers

<p>Government intervention can stabilize the economy</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>Free markets would automatically provide full employment</p> Signup and view all the answers

<p>Aggregate demand is crucial for economic stability</p> Signup and view all the answers