Question

Assertion (A): Fiscal deficit is measured in terms of the amount of borrowing.

Reason (R): External borrowing increases the fiscal deficit.

Options

• Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true, but Reason (R) is false.

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Assertion (A) is true, but Reason (R) is false.

Explanation:

The assertion is true because the fiscal deficit indicates the government’s total borrowing requirement. The reason is false because external borrowing finances the fiscal deficit; it is not added to the deficit as a receipt when the deficit is calculated.