Fiscal Deficit Quiz
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Questions and Answers

Explain the concept of fiscal deficit and its significance in the economy.

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.

What factors contribute to the structure of a fiscal deficit?

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.

Discuss the potential consequences of a high fiscal deficit on an economy.

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.

According to the text, who spearheaded a revolution in economic thinking during the Great Depression?

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

What is the central tenet of the school of thought mentioned in the text?

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

During the Great Depression, existing economic theory was unable to provide an adequate public policy solution to jump-start production and employment because it failed to explain the causes of the severe worldwide economic collapse. True or False?

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

What was the prevailing idea that John Maynard Keynes overturned with his economic thinking?

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

According to the text, what did John Maynard Keynes assert as the main plank of his theory?

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

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