Q. “The proposition that a government should borrow only to invest and not to finance current spending is known as”?

[A] Balanced budget

[B] Effective revenue deficit

[C] Golden Rule

[D] Performance budget

Answer: C
Notes:

Explanation: The proposition that a government should borrow only to invest (i.e., plan expenditure in India) and not to finance current spending (i.e., revenue expenditure in India) is known as the golden rule of public finance.

This rule is undoubtedly prudent but provided spending is honestly described as investment, investments are efficient and do not crowd out the important private sector investments.

Source: TMH Ramesh Singh

Share