economics medium MCQ

What does the term 'Twin Deficit' refer to in the context of the Indian economy?

  1. High inflation and high unemployment
  2. Simultaneous Fiscal Deficit and Current Account Deficit
  3. Trade Deficit and Budget Deficit
  4. Revenue Deficit and Capital Deficit

Answer: Simultaneous Fiscal Deficit and Current Account Deficit

The Twin Deficit hypothesis suggests a strong link between a government's budget deficit (fiscal deficit) and the country's external trade deficit (CAD). High government borrowing increases domestic demand, which spills over into higher imports, thereby widening the Current Account Deficit.

Topic Indian Economy - Concepts
Exam Relevance UPSC Prelims, SSC CGL, Banking
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