Question
Which of the following may lead to a pressure on the government for an upward revision in salaries of government employees?
- Internal Borrowings
- External aid and borrowings
- Counting Currency
- Printing currency
Answer: Option D
Answer: (d)
Printing currency is usually the last resort for the government in managing its deficit. It might help the government in times of need but it should be undertaken only in case of extreme necessity as it has many damaging effects on the economy.
It increases inflation proportionally. It may also lead to pressure on the government for an upward revision in salaries of government employees, which in turn will lead to an increase of government’s expenditure, further necessitating printing of currency and more inflation
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Answer: (d)
Printing currency is usually the last resort for the government in managing its deficit. It might help the government in times of need but it should be undertaken only in case of extreme necessity as it has many damaging effects on the economy.
It increases inflation proportionally. It may also lead to pressure on the government for an upward revision in salaries of government employees, which in turn will lead to an increase of government’s expenditure, further necessitating printing of currency and more inflation
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