Question : Identify the correct statement/s regarding budgetary deficit?
i. Deficit acts as a flow that adds to the stock of the debt.
ii. Deficit acts as stock, which is independent of debt.
iii. Deficit acts as a burden on the future generation.
Option 1: Only ii
Option 2: Only i and ii
Option 3: Only i
Option 4: Only i and iii
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Correct Answer: Only i and iii
Solution : The correct option is only i and iii .
A budgetary deficit represents an annual shortfall between government revenues and expenditures, adding to the national debt over time. Also, deficits can burden future generations with interest payments and potential economic consequences. The budgetary deficit is typically associated with a flow of funds, which is the imbalance between government revenues and government expenditures over a specific period, such as a fiscal year. It is not a stock in itself but can contribute to the accumulation of debt, which is a stock.
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