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Government Budget and Economy — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsGovernment Budget and Economy3 Marks
Question
What is debt trap? Suggest measures to control such situation.
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Answer

Debt trap refers to a situation in which government borrows new funds to pay previous loan or to pay interest on previous loans, this creates a trap for the government and burden of future payments mounts up. In order to solve this problem, government may resort to disinvestment or may reduce wasteful expenditures like unnecessary subsidies, etc.

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