Which of the following statements about national debt are correct?

(A) Deficit can be thought of as a flow variable which adds to the stock of debt

(B) The government finances debt through taxation, borrowing or printing money

(C) Debt owned to foreigners involves a higher burden than debt owned to domestic agents and institutions

(D) Government's debt financing crowds out private borrowers in financial markets

Choose the correct answer from the options given below:

Statement (A) is correct because deficit is a flow variable (measured annually) that adds to debt stock (accumulated total).

Statement (B) is correct as governments use taxation, borrowing, or money creation to manage fiscal obligations.

Statement (C) is correct because foreign debt involves real resource transfers abroad through interest payments, creating a higher burden than domestic debt where payments circulate within the economy.

Statement (D) about crowding out is not universally true—it depends on economic conditions like resource utilization and monetary policy accommodation, making it an unreliable general statement.

The above answer key is verified by NTA. A lot of books show that all the statements are true, however, NTA has marked the answer as Option-2 only.