General Knowledge - Indian Economy - Discussion

Option(C) is also understandable!

If all the government expenditure goes to pay for it's loans then there is no increase in the aggregate demand right?

(Considering that the loans are taken from large banks and foreign institutions....not domestic bondholders).

As per my view answer should be A. Because if supply increases sufficiently than demand, then only inflation can be checked.

Why b is included ?

Guys answer A is write because deficit financing is process in which RBI prints more notes when govt has shortage of fund or money its just like more of money in market that leads inflation raise in general price level.

But price arises because people have more of money than they had. So they are demanding more of goods and services. But govt can check inflation if it would be able to produce the goods in same ratio by demand has increased but this impossible in short run because monetary effects in an economy are instant i.e. Inflation will rise definitely in short run.

Answer should be option A.

The answer should be A, the other options are not convincing from question's point of view.

On what basis RBI prints the currency notes?

Answer should be A only.

I think answer should be A.

The answer should be A.