when should the government not Resort to deficit financing
Dear Esha,
Government should not resort to deficit financing because it leads to an increase in the rate of inflation (i.e. increase in the prices of goods and services) in the country. It reduces/depreciates the value of the country's currency. Hence, it creates a cycle of inflation and more requirement of financing.
Regards,
Government should not resort to deficit financing because it leads to an increase in the rate of inflation (i.e. increase in the prices of goods and services) in the country. It reduces/depreciates the value of the country's currency. Hence, it creates a cycle of inflation and more requirement of financing.
Regards,