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.
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. Only i and iii.
Statements i and iii are correct. A budgetary deficit is a flow, not a stock, meaning it's a rate of spending exceeding revenue over a period.Each deficit increases the national debt (stock). Also, deficits often necessitate future borrowing, creating a burden on future generations who must repay that debt.