Question

In India deficit financing involves : ? A. Central Government borrowing from the RBI B. RBI running down of accumulated cash balances against the issue of treasury bills. C. Creation of money

Answer 1

Answer:

C.creation of money

Explanation:

When the government borrows from the Reserve Bank of India, it merely transfers its securities to the Bank. On the basis of these securities the bank issues more currency and puts them into circulation on behalf of the government. This amounts to the creation of money.