Q.4 Why fiscal deficits are detrimental to growth ?
Ans: Fiscal deficits are detrimental to growth as they:
- Crowd out private investment
- Set-in inflationary pressures
- Increases foreign indebtedness and
- Raise externality risk.
| Keywords: fiscal prudence.Fiscal consolidation |
| Source : NIOS |
| Extra Info : A fiscal deficit occurs when a government spends more money than it earns in revenue.Fiscal deficits don’t include a country’s debts.A fiscal deficit is the opposite of a fiscal surplus. Are Fiscal Deficits Bad? Fiscal deficits aren’t necessarily a bad thing. Running a fiscal deficit can help governments boost economic activity. For instance, they can spend money on social programs and infrastructure when unemployment is high. Boosting government spending can also put more money into consumers’ pockets and encourage them to spend, as is the case with stimulus checks during tough times. |