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Statement 1: Surplus budget is not desired during periods of depression Statement 2: Deficit budget is not desired during periods of inflation

  • A.Both Statements are true
  • B.Both Statements are false
  • C.Statement 1 is correct but Statement 2 is false
  • D.Statement 2 is correct but Statement 1 is false

Answer: A

Both statements are true. In a depression, the government should run a deficit to raise demand, so a surplus budget is not desired. In an inflation, demand has to be cut, so a surplus is desired and a deficit budget is not wanted. The answer is both statements are true, option A.

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