. Deficit financing means that the government borrows money from

(1) The local bodies

(2) The Reserve Bank

(3) The neighbouring countries

(4) All the above

Answer Posted / harman kaur

Deficit financing means when government borrow from central bank of county to cover its deficit in the budget . Deficit financing also means currency creates extra purchasing power and as a result the total circulation of currency increases, demand inceases and which results in prices rise .
This problem can be avoid by over valuation of money.

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