Consider the following statements with reference to the Twin Deficit 1 Twin Deficit refers to ...........

Economic Affairs Public Finance and Debt Management

Consider the following statements with reference to the Twin Deficit:

1.Twin Deficit refers to the Government's Fiscal Deficit and the country's Current Account Deficit (CAD) in its external balance of payments transactions.

2.Twin deficit may results in depreciation of the domestic currency and leads to capital flight from the country.

3.Twin deficit was the primary reason for the currency crisis back in 1991.

Which of the above statements are correct?

1 and 2 only

1, 2 and 3 only

2 and 3 only

1 nad 3 only

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Explanation:

1 and 3 only

The twin deficit, or double deficit, occurs when a nation has both a current account deficit and a fiscal deficit.
This means the country's economy is importing more than it is exporting, and the country's government is spending more money than it is generating.