Budget Deficit Reduction Measures

To reduce a budget deficit, the government must either increase revenue or decrease expenditure. Statement 1 is correct - reducing revenue expenditure directly decreases government spending and helps reduce the deficit. Statement 2 is incorrect - introducing new welfare schemes would increase expenditure and worsen the deficit. Statement 3 is correct - rationalizing subsidies (reducing or eliminating subsidies) decreases government expenditure, thereby reducing the deficit. Statement 4 is incorrect - reducing import duty decreases government revenue from tariffs, which worsens the deficit. Only statements 1 and 3 are measures that reduce the deficit. > Key insight: Deficit reduction = Cut spending + Increase revenue. Welfare schemes and duty cuts do the opposite. Answer: c.