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The difference between fiscal deficit and interest payment during the year is called
- a)Fiscal deficit
- b)Budget deficit
- c)Primary deficit
- d)Revenue deficit
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
The difference between fiscal deficit and interest payment during the ...
Primary deficit= fiscal deficit-interest payments.
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The difference between fiscal deficit and interest payment during the ...
Primary Deficit Explanation
The primary deficit is a crucial concept in fiscal policy and budgeting. It is defined as the difference between the fiscal deficit and the interest payments made by the government during a specific period, usually a fiscal year.
Calculation
The formula to calculate the primary deficit is:
Primary Deficit = Fiscal Deficit - Interest Payments
Significance
The primary deficit provides insight into the financial health of a government. It indicates how much of the fiscal deficit is being used to pay interest on past loans, rather than for current expenditures or investments. A high primary deficit may signal that a government is struggling to manage its debt obligations.
Key Takeaway
In summary, the primary deficit is a critical metric for assessing a government's fiscal position. By focusing on the primary deficit, policymakers can gauge the extent to which debt servicing is eating into the government's resources, potentially leading to unsustainable debt levels.
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The difference between fiscal deficit and interest payment during the year is calleda)Fiscal deficitb)Budget deficitc)Primary deficitd)Revenue deficitCorrect answer is option 'C'. Can you explain this answer?
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