Question

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

• A. To act as a remedy for depression
• B. To decrease aggregate demand
• C. To overcome the losses of public sector undertaking
• D. For implementing poverty alleviation programme

Hint:

Logic Tip: Deficit financing injects money into the economy, so it usually increases aggregate demand.

Answer 1

The Correct Option is B

Step 1:
Deficit financing refers to financing government expenditure through borrowing or printing new currency when expenditure exceeds revenue.

Step 2:
Deficit financing is mainly used for:
• Economic development
• Removing depression
• Poverty alleviation programmes
• Financing public sector activities

Step 3:
Deficit financing generally increases purchasing power and aggregate demand in the economy. Hence, decreasing aggregate demand is not its objective.

Step 4:
Therefore, the option which is not an objective of deficit financing is: \[ \boxed{\text{To decrease aggregate demand}} \] Hence, the correct answer is: \[ \boxed{\text{(2) To decrease aggregate demand}} \]