UGC-NET 2023 Question 90: Fiscal and monetary policy effectiveness
Given below are two statements, one labelled Assertion (A) and the other Reason (R). Assertion (A): According to the Domar condition of debt sustainability, public debt would not rise as a proportion of GDP if the effective interest rate on government liabilities is less than or equal to the growth rate of GDP at current price. Reason (R): The growth rate of GDP of an economy at current price is bound to be less than the effective interest rate on government bonds. In the light of the above statements, choose the most appropriate answer:
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Fiscal and monetary policy effectiveness has come up 30 times in 7 exams since 2010.
What this question tests
This question is on Fiscal policy, stabilisers and Ricardian equivalence, part of Fiscal and monetary policy effectiveness in Macroeconomics.
The tools of fiscal policy, how the budget stabilises the economy on its own, and when deficits do not matter.
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