Skip to content

CA Foundation · Business Economics · Public Finance

Which of the following statements about the fiscal deficit is correct?

Fiscal deficit is total expenditure less revenue receipts and non-debt capital receipts, so it measures the government's total borrowing requirement. Revenue deficit and primary deficit are different measures, and counting borrowings as receipts would remove the deficit altogether.

  1. AIt equals total expenditure minus total receipts including borrowings
  2. BIt equals total expenditure minus revenue receipts and non-debt capital receipts, and so indicates the government's total borrowing requirementCorrect
  3. CIt equals revenue expenditure minus revenue receipts
  4. DIt equals the fiscal deficit minus interest payments

Explanation

Fiscal deficit = total expenditure - (revenue receipts + non-debt capital receipts), which is the amount the government must borrow. Option A includes borrowings in receipts, which would make the deficit zero. Option C defines the revenue deficit and option D defines the primary deficit.

Did you get it right without looking?

One question tells you little. A timed set on Public Finance shows your real accuracy, how long you take and where you lose marks.

Practise Public FinanceFree diagnostic mock

More Public Finance questions