When the government resorts to borrowing only to clear the backlog of interest payments, it is referred to as ______________.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Zero primary deficit.
- A zero primary deficit indicates the need for government borrowing to meet interest payments.
- A shrinking primary deficit indicates improving the fiscal health of an economy.
- A deficit may arise in case government spends more during a year either due to unanticipated events like a disaster or calamity or introduces certain policy changes to spur economic activities.