What are the implications of a large revenue deficit? Give two measure

1.	What are the implications of a large revenue deficit? Give two measures to reduce this deficit.
Answer» 1. Revenue deficit indicates dis¬savings on government account because the government has to make up uncovered gap. 2. Revenue deficit implies that the government has to cover’this uncovered gap by drawing upon capital receipts either through borrowing or through sale of its assets. 3. Since government is using capital receipts to meet generally consumption expenditure of the government which leads to an inflationary situation in the economy. Two measures to reduced revenue deficit are : 1. Government should reduce its unproductive or unnecessary expenditure. 2. Government should increase its receipts from various sources of tax and non-tax revenue.

What are the implications of a large revenue deficit? Give two measures to reduce this deficit.

Answer»

1. Revenue deficit indicates dis¬savings on government account because the government has to make up uncovered gap.

2. Revenue deficit implies that the government has to cover’this uncovered gap by drawing upon capital receipts either through borrowing or through sale of its assets.

3. Since government is using capital receipts to meet generally consumption expenditure of the government which leads to an inflationary situation in the economy.

Two measures to reduced revenue deficit are :

1. Government should reduce its unproductive or unnecessary expenditure.

2. Government should increase its receipts from various sources of tax and non-tax revenue.

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