Question
UPSC Prelims 2020 Question:
In the context of the Indian economy, non-financial debt includes which of the following?
- Housing loans owed by households
- Amounts outstanding on credit cards
- Treasury bills
Select the correct answer using the code given below:
Answer (Detailed Solution Below)
Option 4: 1, 2 and 3
Detailed Solution
Explanation:
- Financial debt includes debt of those institutions that borrow many for the sole purpose of relending. Non-financial debt is the debt issued by non-financial institutions such as government, household or a business not engaged in the financial sector. The non-financial sector includes entities such as corporations, small businesses, manufacturers, and many other types of companies.
- Non-financial debt includes household or commercial loans. So, point 1 is correct.
- Credit card debt qualifies as non-financial because it is not used for relending purpose. So, point 2 is correct.
- Similarly, treasury bills are issued by the government and are also regarded as non-financial debt. So, point 3 is correct.
Therefore, option (4) is the correct answer.
Subject: Economics | Public Finance
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