If farmers loans are waived in India, how will it affect the aggregate demand in the economy? L. Private consumption impact via increase in private sector net wealth 2. Public sector impact via changes in government expenditure / taxes 3. Crowding-out imp

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Q: 125 (CAPF/2018)
If farmers’ loans are waived in India, how will it affect the aggregate demand in the economy? L. Private consumption impact via increase in private sector net wealth
2. Public sector impact via changes in government expenditure / taxes
3. Crowding-out impact via higher borrowings by State Governments
4. Crowding-in impact via higher credit availability as bank NPAs fall
Select the correct answer using the code given below.

question_subject: 

Economics

question_exam: 

CAPF

stats: 

0,24,49,34,24,9,6

keywords: 

{'aggregate demand': [0, 0, 0, 1], 'higher borrowings': [0, 0, 0, 1], 'private consumption impact': [0, 0, 0, 1], 'farmers': [1, 3, 8, 26], 'loans': [1, 1, 4, 14], 'public sector impact': [0, 0, 0, 1], 'bank npas': [0, 0, 0, 1], 'private sector': [0, 0, 2, 9], 'higher credit availability': [0, 0, 0, 1], 'economy': [1, 3, 8, 35], 'government expenditure': [1, 0, 0, 1], 'net wealth': [0, 0, 0, 1], 'impact': [3, 0, 1, 7], 'india': [8, 1, 7, 13]}

Option 1: Private consumption impact via increase in private sector net wealth. This option states that if farmers` loans are waived in India, it will impact private consumption by increasing the net wealth of the private sector. The rationale behind this is that when farmers` loans are waived, they will have more disposable income, which can be used for consumption. This increase in consumption can drive the aggregate demand in the economy.

Option 2: Public sector impact via changes in government expenditure/taxes. This option states that if farmers` loans are waived, it will have an impact on the public sector through changes in government expenditure and taxes. When loans are waived, the government bears the burden, which can lead to an increase in government expenditure and potentially changes in tax policies.

Option 3: Crowding-out impact via higher borrowings by State Governments. This option suggests that if farmers` loans are waived, it can lead to a crowding-out effect, where state governments may have to borrow more to cover the waived loans. This increased borrowing can potentially crowd-out private investment and have a negative impact on aggregate demand.

Option 4: Crowding-in impact via higher credit availability as bank NPAs fall. This option states that if farmers` loans are waived, it can lead to higher