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Question
Read the following statements carefully and choose the correct alternatives given below:
Statement 1: Fiscal Deficit = Total Budget Expenditure - Total Budget Receipts (Net of borrowing)
Statement 2: Primary Deficit = Fiscal Deficit + Interest Payments.
Options
Both the statements are true.
Both the statements are false.
Statement 1 is true and Statement 2 is false.
Statement 2 is true and Statement 1 is false.
Solution
Statement 1 is true and Statement 2 is false.
Explanation:
The difference between total expenditure and total receipts (revenue and capital receipts), excluding borrowing, is known as the fiscal deficit. Fiscal Deficit = Total Budget Expenditure - Total Budget Receipts (Net of borrowing). The primary deficit is the difference between the current year's fiscal deficit and interest payments on prior borrowings. Primary Deficit = Fiscal Deficit - Interest Payments.