Question

The concept of twin deficits refers to ________. A) the phenomenon of simultaneous trade and government budget deficits B) the phenomenon of simultaneous government and private budget deficits C) the phenomenon of simultaneous state and federal budget deficits D) all of the above E) none of the above

Answer 1

It happens mainly due to two types of deficits

1.CURRENT ACCOUNT DEFICIT(related to international trade when an economy imports more than it exports.)

2.FISCAL DEFICIT- It is related to the concept when government spending increases than its generation of revenue.

It causes a very disastrous result for the economy and economy even weaker. Very rarely it is found for an economy in history but the government should focus on more export, investment, revenue generation to avoid this.

Hence option A