Discuss the meaning of following deficits: (i) Revenue Deficit; (ii) Fiscal Deficit; and (iii) Primary Deficit.

Sandeep Garg Macroeconomics Class 12 Solutions Circular flow of Income – Long Questions – Q.5 Discuss the meaning of following deficits: (i) Revenue Deficit; (ii) Fiscal Deficit; and (iii) Primary Deficit.

Solution:

Revenue deficit is a situation where governments revenue expenditure exceeds its revenue receipts. This implies government’s inability to meet its regular expenditure out of its regular income.
Revenue Deficit= Revenue expenditure- Revenue receipts

Fiscal deficit refers to a situation where Governments total expenditure is greater than its total receipts net of borrowings (excluding borrowings).
Fiscal Deficit= Total expenditure – Total revenue (net of borrowings)

Primary deficit refers to the excess of fiscal deficit over interest payments on borrowings by the government.
Primary Deficit= Fiscal deficit- interest payments

Long Questions – Sandeep Garg Macroeconomics Class 12 Solutions Government budget and the Economy

• Define Government budget. Explain the various objectives of a government budget.
• What is meant by non-tax revenue? Explain the different sources of non-tax revenue
• What is meant by budget expenditure? Distinguish between revenue expenditure and capital expenditure.
• What is the meaning of revenue receipts? What are the two main sources of revenue receipts?
• Discuss the meaning of following deficits: (i) Revenue Deficit; (ii) Fiscal Deficit; and (iii) Primary Deficit.
• Distinguish between: (a) Direct Tax and Indirect tax (b) Primary deficit and Revenue deficit
• Distinguish between the following (a) Revenue receipts and Capital receipts (b) Revenue deficit and Fiscal deficit