When Government expenditure is more than income, through which of the following ways, it does the deficit financing?

(1) From Banks

(2) From People within the country

(3) From International Organisations

Choose the correct answer using the options given below:

Solution

The origin of the financial crisis can be traced from the inefficient management of the Indian economy in the 1980s. We know that for implementing various policies and its general administration, the government generates funds from various sources such as taxation, running of public sector enterprises etc. When expenditure is more than income, the government borrows to finance the deficit from banks and also from people within the country and from international financial institutions.