When a government spends more than it collections by way of revenue, it incurs a budget deficit. There are various measures that capture government deficit and they have their own implications for the economy. Figure out the statements which describe the nature of fiscal deficit in the economy.
A. Large portion of revenue deficit in fiscal deficit indicates larger investment in the economy.
B. It indicates the total borrowing requirements of the government from all sources.
C. It is calculated to obtain an estimate of borrowing on account of current expenditures exceeding revenues.
D. It is the difference between the government's total expenditure and its total receipts excluding borrowing.
Choose the correct answer from the options given below:
When a government spends more than it collections by way of revenue, it incurs a budget deficit. There are various measures that capture government deficit and they have their own implications for the economy. Figure out the statements which describe the nature of fiscal deficit in the economy.
A. Large portion of revenue deficit in fiscal deficit indicates larger investment in the economy.
B. It indicates the total borrowing requirements of the government from all sources.
C. It is calculated to obtain an estimate of borrowing on account of current expenditures exceeding revenues.
D. It is the difference between the government's total expenditure and its total receipts excluding borrowing.
Choose the correct answer from the options given below:
Solution
Fiscal deficit total expenditure total receipts excluding borrowings (D), and it indicates the total borrowing requirement of the government from all sources (B). Statement A is wrong: a large revenue deficit component means borrowing is financing consumption, implying lower investment. Statement C describes the revenue deficit, not the fiscal deficit.
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