There has been a persistent deficit budget year after year. Which action/actions of the following can be taken by the Government to reduce the deficit? 1. Reducing revenue expenditure 2. Introducing new welfare schemes 3. Rationalising subsidies 4. Reducing import duty Select the correct answer using the code given below.

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YESPYQ · Accepted Answer

Correct answer: 1 and 3 only. A budget deficit occurs when government expenses ex- ceed revenue. It can be used as an indicator of the financial health of a country. It is a term more commonly used to refer to govern- ment spending and receipts rather than businesses or individu- als. When a budget deficit occurs, it means that the current expenses surpass the income generated from regular operations. To cor- rect its nation’s budget deficit, often referred to as a fiscal deficit, a government may cut back on certain expenditures or increase revenue-generating activities. Statement 1 is correct : Reducing the revenue expenditure will certainly help in bridging the gap. Reducing revenue expenditure (such as government spending on salaries, interest payments, and subsidies) directly reduces the fiscal deficit. By controlling unproductive expenditure, the government can balance its bud- get more effectively. Statement 2 is incorrect : Introducing new welfare schemes will most likely result in increasing expenditure and so will ex- panding industries which would require capital infusion.

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