|Consider the following:|
|1. Fiscal deficit is the difference between what the government earns and its total expenditure.|
|2. It is an indication of the total borrowings needed by the government. Choose the correct one regarding Fiscal deficit:|
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :[c] The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included. A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.
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