jnu

[neha 1]

question-if the fiscal deficit increases
a. this will necessarily lead to an increase in the current account deficit
b. this will necessarily lead to an increase in inflation
c. this will necessarily lead to an increase in the current account deficit if there is no change in private savings-investment balance.
d. this has no bearing at all on the current account deficit.

[ABHI1994]

i think option d,correct me if i am wrong

On 6 May 2015 at 18:29, neha 1 [via Discussion forum] <[hidden email]> wrote:

question-if the fiscal deficit increases
a. this will necessarily lead to an increase in the current account deficit
b. this will necessarily lead to an increase in inflation
c. this will necessarily lead to an increase in the current account deficit if there is no change in private savings-investment balance.
d. this has no bearing at all on the current account deficit.

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[RS]

It is surely c.
pvt saving = I + Current account + (G-T)
CA= Sp-I-(G-T)
if there is fiscal deficit that is G>T then if there is no change in S and I then it will lead to current account deficit