Q. With reference to Fiscal Deficit consider the following statements:
1.When the government income is higher than its total expenditure, it is known as a fiscal deficit. 
2.An increase in the capital expenditure can cause fiscal deficit.
3.Printing new money is one of the ways to finance the fiscal deficit..
Which of the statements given above is/are correct?

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation –

Statement 1 is incorrect. When the government spends more than its total income, such a situation is called a fiscal deficit.

Statement 2 and 3 are correct. An increase in the capital expenditure can cause fiscal deficit. Printing new money is one of the ways to finance the fiscal deficit.

Source: Live Mint