Official Answer Key & Detailed Solution
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Correct Answer: Option (D) — 1, 2, 3 and 4
Concept & Option Breakdown
Standard Reference VerifiedStatement 1 is correct: In Union Budget accounting, external debt and liabilities have traditionally been stated at historical exchange rates prevailing when loans were contracted.
Statement 2 is correct: Heavy government borrowing raises the demand for loanable funds, putting upward pressure on real interest rates.
Statement 3 is correct: A high fiscal deficit crowds out private investment by consuming available domestic financial savings and raising borrowing costs.
Statement 4 is correct: Interest payments consistently form the single largest component of non-plan revenue expenditure in the Union Budget.
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