Home PYQs UPPSC UPPSC MCQs Prelims 1993 (GS Paper I)

Question

In deficit financing, the difference between expenditure and revenue is covered by printing new notes. Meaning of this sentence is Economic development. But if it is unsuccessful then the condition arise is known as?

  1. Currency contraction
  2. Demonetization
  3. Currency devaluation
  4. Currency inflation

Answer:

Option D: Currency inflation

Detailed Solution:

The correct answer is “Currency inflation”.

In deficit financing, when the government covers the difference between expenditure and revenue by printing new currency, it can lead to an increase in the money supply. If this approach is unsuccessful, it typically results in currency inflation, where the value of money decreases and prices rise due to an excess supply of money in the economy.