The correct answer is (a) and (b) Explanation & Key Takeaways: • Deficit Financing can be defined as the practice where the government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds. • The government resorts to withdrawing money from its cash deposited in the RBI or orders the RBI to print new currency notes or borrows money from the public in the form of bonds and other securities. Need for deficit financing:- • When sufficient resources are not available to carry out economic activities. Hence, deficit financing is undertaken to meet fiscal deficit targets. • It is preferred as the price rise is considered to be a lesser evil and is therefore preferred over a lower growth rate. • It also occurs when there is rapid growth in expenditures. • Increased spending on unproductive and non-developmental activities can also lead to deficit financing.