Question : Assertion (A): A higher value of primary deficit is better for the economy
Reason (R): High value of the primary deficit indicates the situation where even after paying the amount of interest, a significant amount of borrowing is left to be used for the expenses.
Option 1: Both A and R are true and R is the correct explanation of A
Option 2: Both A and R are true but R is not a correct explanation of A
Option 3: A is true but R is false
Option 4: A is false but R is true
Correct Answer: Both A and R are true and R is the correct explanation of A
Solution : The correct answer is (a) Both A and R are true and R is the correct explanation of A.
A primary deficit represents the deficit in the government budget excluding interest payments. It shows the borrowing needs of the government for its non-interest expenses.
In certain cases, a higher value of primary deficit can be considered better for the economy. It indicates that the government has more funds available to allocate towards non-interest expenditure, such as infrastructure development, social welfare programs, and investments that can stimulate economic growth.
The reason accurately explains that a high primary deficit means there is a significant amount of borrowing remaining after paying the interest on existing debt. This implies that a substantial portion of the borrowing is used for non-interest expenses, allowing the government to make more investments in the economy.
Therefore, the correct answer is (a) Both A and R are true and R is the correct explanation of A. I apologize for any confusion caused by my previous response.
