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What is the effect of deficit financing on unemployment?

Regarding the effect of deficit financing on unemployment, we have to classify the economies as developed and developing economies. This is because the Keynesian prescription of deficit financing helps the developed countries to overcome the unemployment but it has not helped the developing countries in this respect. This is because in developed countries, when the […]

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What is the effect of deficit financing on price level?

There are two opinions regarding the effect of deficit financing on the price level especially in a developing country. According to one view, deficit financing need not be inflationary in character especially if it is used during the peace time. The advocates of this view argued that: (a)            In a developing economy the existence of […]

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What is the effect of deficit financing on income distribution?

Deficit financing is inflationary in character and as a result it affects a section of the society favorably and the other section unfavorably.   Rich people become richer and the poor turns out to be poorer because of deficit financing especially during the war period.   The businessmen, traders, speculators, industrialists and other benefit by deficit financing […]

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What is the purpose of deficit financing?

There are several purposes for resorting to deficit financing. The following are the; purposes: War finance: A country in war experiences severe shortage of financial, resources, especially the cost of modem warfare is so prohibitive that the country resorts to deficit financing. During this period the country cannot resort to taxation or public borrowing because […]

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What is deficit financing?

Deficit financing is understood in different ways in different countries. It is understood as the excess of current expenditure over current revenue which is financed either through public borrowing or the creation of new money by the government. So the deficit budget is also called deficit financing in USA. But in India deficit financing is […]

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What are the demerits of indirect taxes?

The fundamental defect of this type of tax is that it does not conform to the principle of ability to pay as it affects every individual hi the same way irrespective of his economic position. The revenue from indirect taxes cannot be certain. This is because a tax imposed on a commodity with highly elastic […]

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What are the merits of indirect tax?

Indirect taxes are imposed at the point of consumption and so it is very easy to collect them. The cost of collection of indirect taxes is almost nil as every person will pay the tax as he buys the commodity on which the tax is imposed. It is very simple and easily understandable as only […]

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What are the demerits of direct taxes?

Direct taxes like income tax, are considered as tax on honesty of the people. Those people who can evade or avoid it are rarely prosecuted. Hence, there is no incentive to pay the tax. There is no logical basis for levying or determining the tax. As a result political considerations overweigh the economic and other […]

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What is evolution of mixed economy?

Evolution of the concept of Mixed economy:   There was no reference to the mixed economic system in Economic literature in the past. Economists were mainly familiar and advocated the Laissez faire or free enterprise system, as several countries could develop fast following the free enterprise system, in which there was no or little government […]

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Meaning of Political Environment

It is well known that the business environment in a country is very much interlinked with the political environment. The political environment simply means the political ideology which is adopted by the government. In a democratic country like India, this political ideology changes as and when there is a change in the party ruling the […]

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