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Which of the following factors are not responsible for poverty?

A. Inflation

B. Increase in Government expenditure

C. Deficit Financing

D. Higher savings and Capital formation


1. Only A and C 
2. Only B, C and D
3. Only B and D 
4. Only B and  C

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Correct Answer - Option 4 : Only B and  C

The Correct answer is Only B and C.

  • Inflation increases the prices of food and services.
    • Inflation erodes the value of money, hence poor people have to spend more money to purchase the same amount of goods. Which ultimately increases poverty among the people.
    • Hence statement  A is incorrect.
  • When the government goes for an increase in expenditure then the money in the market gets redistributed to the people.
    • The government implements this measure to increase the money supply in the market. 
    • This increases economic activities in the economy and ultimately leads to a reduction of poverty among people.
    • Hence statement  B is correct.
  • Deficit financing is another way of increasing the money supply in the market so it also helps in the reduction of poverty.
    • Hence statement C is correct.
  • Higher savings leads to higher capital formation.
    • This increases economic activities in the economy and ultimately leads to a reduction of poverty among people.
    • Hence statement D is incorrect.

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